traded derivatives or OTC derivatives) on petroleum prices and volatility, there was no consensus; some participants underlined the role of excessive financial speculation in the surge in prices and volatility; other participants, especially those involved in price reporting, felt that spot markets set their own prices, independently of any influence from financial markets; a third group recognized that it is difficult to isolate the effect of the physical layers from the financial layers in the current oil pricing system and, therefore, it is difficult to construct theoretically and test empirically whether the financial market drives the physical or the other way around. The Workshop noted the increasing interaction of the physical and financial energy markets. It recommended continuing the ongoing effort to better understand the functioning of each of these markets, as well as the linkages between the physical and financial markets. The Workshop also recommended the enhancement of the international cooperation on market data transparency, and commended the Joint Oil Data Initiative1 (JODI) efforts in this regard. The Forum recognized that regulations have important effects on market functioning and participants' behavior and emphasized the need for appropriate regulation, with adequate international coordination. The participants noted the positive and constructive nature of the dialogue among energy stakeholders. It was recommended that similar events covering the interlinkages between the physical and financial energy markets, as well as energy market regulation, be held on a regular basis in order to promote a deeper understanding and dialogue on these complex and important issues. --More
