Energy Markets Partly Blinded by EIA Budget Cuts

May 4, 2011

"Market Intelligence." Is the phrase an oxymoron? Some true-believers in the free market will concede that markets work most efficiently when all players are getting plenty of information on things like supply and demand in a transparent manner.

Hence the concern over recent Congressional cuts in the budget of the Energy Information Administration (EIA) — which by most accounts has served as an honest broker of accurate information highly useful to players in the energy markets. The fiscal 2011 continuing resolution passed by Congress April 14, 2011, cut the EIA's budget drastically.

In response to deep cuts in its budget, EIA announced that it would not be able to compile and publish products like its ongoing estimates of US oil reserves. In fact, EIA will not even be able to continue its investigation of whether speculators are driving up oil prices.

This puts the budget-cutting Congress at odds with President Obama on market transparency. Obama on April 21 had announced that his administration would be investigating to see if fraud or manipulation in oil markets was driving up gasoline prices. Following up on Obama's order, Attorney General Eric Holder set up a new working group to look into the matter. In addition to Holder's Justice Department, other federal agencies, such as the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC) also have jurisdiction over oil trading. During the 2008 campaign, Obama had promised to crack down on oil speculation.