As one of the primary users of the banking and hedging tools that Dodd-Frank seeks to control, the energy business is now abuzz with how those controls will affect a sector that has fought disruption and transformation with greater vehemence each passing year. In an industry accustomed to tinkering around the edges with technology while leaving fundamental business and regulatory models untouched, Dodd-Frank is at least familiar territory.
The value of energy hedging is in the billions of dollars annually, but the very fact that an exact number is so hard to ascertain is part of the problem. Academic arguments have largely focused on whether it raises or lowers the value of firms, political arguments have focused on whether consumers are being gouged, and meanwhile banks, corporations and trading houses continue to place unaccounted for bets on the U.S. energy sector every day.
In a business as vibrant, essential, changeable and prone to sudden shifts as the intersection of the financial and energy sectors, knowing what you don't know is probably a good start.
Dodd-Frank needs to be seen for the false start that it was, and the simplest possible new legislation designed to maximize both flexibility and transparency in energy finance needs to be passed.
Admitting you don't know something is hard for everyone, and probably especially hard for Members of the House and Senate. But until legislation is crafted to allow for change in the energy sector, we are living according to rules crafted for a world that no longer exists.
Peter Gardett currently serves as the managing editor of AOL Energy and previously served as a senior correspondent and later a bureau chief for Argus Media.