This is an exciting time for the energy industry with the advent of shale plays and development of new alternative sources of energy, but there are still problems hounding the industry. These range from infighting to price speculation, among other ills, according to Raymond J. Learsy, a former commodities trader, private investor, and author of “Oil and Finance: The Epic Corruption.”

“I think price speculation is rampant. We have no oversight with an agency, the CFTC (Commodity Futures Trading Commission), that is meant to look into speculation and limit the use of speculative contract,” he told Hart Energy’s Midstream Monitor.

“The CFTC was mandated to come up with limits by January of this year, but they seem to be under very little pressure to actually come to a resolution. They have done almost next to nothing. It has been a sham and speculation goes on.”

Learsy noted that the sentiment regarding price speculation was backed up by ExxonMobil chief executive Rex Tillerson at a Senate Finance Committee hearing in May. Tillerson told Sen. Maria Cantwell (D-WA) that the price of oil, which was then trading at roughly $100 per barrel, should not be higher than $60 to $70 if the market was dictated by supply and demand fundamentals.

Such warnings from the head of an oil major to Congress aren’t new. In 1990, Leon Hess, the founder of Hess, told Congress, “I’m an old man, but I’d bet my life that if the Merc (Nymex) was not in operation, there would be ample oil and reasonable prices all over the world without this volatility.”

Learsy said, “What he was saying is that the exchanges have skewed the price of oil, taken it away from a clear supply and demand equation to something that has more to do with speculation and logarithms and God knows what else. The whole idea of a market -riven supply and demand price has pretty much gone out the window.

“Oil used to be traded between producer and consumer without any commodity exchanges. There was a steady, reasonable relationship between producers and suppliers without all of this incredibly dramatic movement of price points from one day to the next, or even within the same day.”

Another headwind facing the energy industry is the infighting from different segments, which is working against natural gas. Some opposition may be building from the alternative-energy producers that don’t want to compete with all of the natural gas that will be developed.

“The trade-off (with hydraulic fracturing) is energy independence, energy economy, and energy security. I think the producers are very aware they’re being watched carefully on this issue and I feel they have the technology to deal with it in a very safe way,” he said.

Additionally, natural gas is facing opposition from a Congress that is heavily influenced by the oil and coal industries. “There are many forces at work that point us in the direction to use more and more gasoline, whether it’s the road builders, auto industry, or the oil industry. They all have great interest in the halls of government. It’s been very difficult to come up with a policy that reduces the consumption of gasoline, which would go a long way towards making ourselves energy independent.”

He added that if electric generation was based on market logic and supply and demand focused on the energy source most beneficial to the environment, the U.S. would be making very dramatic and quick steps to convert coal-fired power plants to gas-fired plants.

During the 2009 debates to create a domestic energy policy, Learsy noted while there were proposals to reduce carbon through a cap-and-trade system that was largely aimed at the coal industry, there was no mention of increasing use of natural gas. In his book he says, “Given the fact that natural gas, though a fossil fuel, is vastly more efficient and cleaner burning than coal- or petroleum-based products, this omission can be explained only by the malign power of vested industrial and political interests.”

He told Midstream Monitor that although the U.S. is on its way to energy independence through the development of both oil and gas shale plays, government policies designed to support natural gas are necessary to make this transition.

“It would make a lot of sense to have incentives in place to encourage the use of natural gas as a substitute for gasoline. It requires natural gas vehicles, but it also requires government subsidies and incentives for this conversion,” Learsy said.

Learsy said a domestic energy policy by his design would include a voucher system for gasoline to support such a conversion. Also, he supports the development of the Canadian tar sands and the Keystone XL pipeline.

“There is genuine concern over things such as (oil) spills, but I don’t think the alternatives are being properly weighed. Are we better off importing oil from Venezuela and Saudi Arabia? I think we are much better off putting the pipeline in.

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