The industry that Enron made infamous - energy trading - is springing to life again. Volatile energy markets and record-high commodity prices are prompting renewed interest from investors eager to play in the sector. That has pushed banks and a growing number of hedge funds to hire more energy traders and brainy quantitative minds to back their bets on energy prices. In Houston, New York, and London, a scramble for top trading talent has ensued that rivals the cutthroat hiring frenzy of the late 1990's.

The entire market is hot right now and everybody is talking about expansion. However, with the revival come questions from some financial market analysts about whether energy trading will be able to withstand another potential meltdown. While banks have stepped in with their superior balance sheets, credit ratings, and trading skills to fill the liquidity void left by Enron, the latest ramp-up in trading has also been marked by an air of secrecy underscored by the proliferation of hundreds of hedge funds that are speculating on everything from crude oil to electricity in both regulated and unregulated markets. Many funds are being aided by investments from banks, which are also buying up distressed power plants and other remnants of the collapsed sector.

The journey to more liquid energy trading marketplaces is proving to be a turbulent one. While the expectation was that a highly liquid and transparent market would develop, the reality is that globally, the gas and electricity markets do not yet provide the necessary liquidity and transparency. The current climate will place a high burden of proof on companies to adequately disclose the risks and performance of their energy trading operations. This disclosure is not just to shareholders and the wider capital markets, but also to politicians, regulators, and energy consumers. Convincing stakeholders becomes even more critical against a background of complex market change. While the direction of change is relatively certain – towards open markets and customer choice – the exact shape and the rulebooks are evolving.

This comprehensive report on B2B Energy Trading looks at the various aspects of energy trading; the issues and challenges facing the industry; the doubts which still remain; financial aspects of the industry; and much more. The report analyzes the various types of trading available today and the impact of trading on the overall energy market. Read on to learn more about one of the fastest growing areas in the energy industry today.



 View Table of Contents

Publication Date: January 2007
Publisher: Energy Business Reports