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Many financial industry analysts are bearish on the oil industry right now. I’m not sure they’re right, as I note below, but I also think it’s important to recognize that financial market impact of oil price fluctuations is not the only impact U.S. oil production has on markets generally.

One thing I want to make clear at the outset, though, is that I am not a financial analyst, or an economist (as I have previously noted). My comments here are reactions to things analysts are saying based on my experience researching U.S. shale oil markets and activity, as well as the U.S. transportation sector in recent years.  My thoughts are related to my expectations for how I think the companies and people in the industry are likely to react, and reflect my hope that financial market changes don’t negatively impact other essential planning, in areas related to health, safety, and the environment, the industry desperately needs.

Back to the market predictions:  Goldman Sachs and some other analysts see the oil sector as over saturated and anticipate continued supply gluts to keep prices down.  According to a report from Goldman analysts, U.S. price indicator West Texas Intermediate (WTI) crude will fall…

News Release: 

The Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) have signed two Memoranda of Understanding (MOU) to address circumstances of overlapping jurisdiction and to share information in connection with market surveillance and investigations into potential market manipulation, fraud or abuse. The MOUs allow the agencies to promote effective and efficient regulation to protect energy market competitors and consumers.

Finally, the CFTC and FERC seem to have resolved some serious jurisdictional overlap problems between the agencies related to Dodd-Frank (section 720(a)(1)), which required the agencies to adopt a Memorandum of Understanding (MOU) to resolve several key issues. It’s taken a while to get here.  Recall that settling (or at least improving) jurisdictional questions became especially acute in the wake of the Brian Hunter case, where the CFTC joined the defendant against FERC claiming that the CFTC had exclusive jurisdiction over Hunter’s alleged trading violations.  The DC Circuit agreed with Hunter and the CFTC (opinion pdf). 

At long last, there are two MOUs, one related to jurisdiction (pdf) and the other related to information sharing (pdf). According to the FERC news release, the jurisdiction MOU provides a process the…

Last week, I had the pleasure of being part of the Second Annual Searle Center Conference on Federalism and Energy in the United States.  (I had the good fortune to be part of the first one, too.)  The conference covered a wide range of energy issues from electricity transmission siting to hydraulic fracturing to natural gas markets.  One paper/presentation struck me as particularly interesting for markets generally (I am told an update version will be available soon at the same site: “The Evolution of the Market for Wholesale Power” by Daniel F. Spulber, Kellogg School of Management, Elinor Hobbs Distinguished Professor of International Business and Professor of Management Strategy & R. Andrew Butters, Kellogg School of Management, Northwestern University.

Here is the conclusion: 

A national market for wholesale electric power in the US has emerged following industry restructuring in 2000. Tests for correlation and Granger Causality between trading hubs support the presence of a national market. Going beyond pairwise analysis, we introduce an array of multivariate techniques capable of addressing the national market hypothesis, including the common trend test. Although there is strong evidence of integration between the series, the analysis suggests a division between the eastern and western parts of the

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