India has called for strengthening current regulatory framework for commodity futures and derivatives markets.
Speaking at the International Energy Forum (IEF) here, India's Petroleum Minister Jaipal Reddy said "We need to consider establishing position limits and moving OTC activity on to regulated exchanges."
He said price discovery of such a vital and finite resource as oil cannot be left entirely unregulated, whether in the commodity derivatives markets or the financial markets.
Unregulated over-the-counter (OTC) transactions and trading in ‘paper barrels', along with unbridled speculation activity were to blame, he added.
Most developing economies were faced with huge economic hardship during the unprecedented oil price rise in June 2008, when international oil prices exceeded $ 145 per barrel.
The initiatives being taken in the US, UK and other countries are steps in the right direction, to bring in regulatory oversight of the physical and financial markets, he added.
The minister also called for improved understanding of inter-linkages between the physical and financial markets to address the issues of oil price volatility and price discovery.
he added that oil price discovery cannot be left entirely unregulated and underlined that unregulated over-the-Counter transactions and trading in 'paper barrels', along with unbridled speculation activity were to blame for unprecedented oil price rise in 2008.
The minister extended Indian support for further initiatives by IEF and other international organizations, for putting in place suitable regulatory mechanisms, to prevent a recurrence of 2008
The Extraordinary IEF Ministerial Meeting is the final stage of a process that started with the landmark Cancun Ministerial Declaration approved by 66 countries at the 12th IEF Ministerial Meeting in March 2010.
The Cancun Ministerial declaration addresses two main points, an enhanced IEF framework to strengthen the producer-consumer dialogue and ways to reduce energy market volatility.
