Secondly this statment from Cook is braindead

Setting up an exchange in Iran will enable the country to manage the risk of volatile oil prices better,

The sovereign sellers, oil majors (BP excepted) and large scale buyers share one common trait.  They are gutless when it comes to pricing their sales/purchases.  It would be nice of Mr Cook to tell us just how he proposes to get the Iranians/Saudis/Emirates/Kuwaitis to sell fixed price well forward in time on an exchange when they won't do it now with physical bbls.

Their purchasing/sales managers never, ever want to do a fixed price trade.  Why you ask?  Number one reason, is you can be wrong and in such a transparent way that even your boss can figure it out.  Iran could eliminate price volatility tomorrow simply by posting a fixed price for lifting in the next 30 days and requiring their term buyers to lift rateably in each 30 day period.  But they are paranoid that they'd be low in some months.  So instead of taking responsibility for their trading, they sell on WTI - X or DTD Brent - X and whine about "traders and middlemen" taking advantage.....and about hedging losses when they do speculate and try to fix a price.

It's a bit unfair to the peons that actually make the trades as they are compensated with moderate, fixed salaries and get 100X the shit when the are wrong than kudos when they are right.  Much better to trade off of Platts or some other industry marker and go home at 5 PM.  Top management is  generally ignorant beyond words on how these markets work -firmly stuck in the 1950's.  One such putz ranted at my group that "we don't want to pay for our insurance (hedging).  Somehow we were to be the only players in the market that never lost.

All the sellers demand their people beat the market average (Platts/Argus Mean), while the buyers insist on Platts Mean minus.  And they wonder why the traders move the marker around like a yo yo...If they just got together and did half their business with fixed price deals, the middlemen would thin out fairly quickly.  Only the real derivative specialists and the black bag boys would have any valued added.

I made a speech to that effect to a bunker fuels conference once.  The traders in the audience were cringing and the shipping co. buyers were squirming in their seats.   But I was ready to retire,  tired of Wall Streeters being bashed and just wanted to see the reaction to some harsh truth. You could hear a pin drop.

I recommended that Iran consider as a matter of urgency the creation of a Middle Eastern Energy exchange, and particularly a new Gulf benchmark oil price.

Now this could work, EXCEPT the Iranians will lose their water when the spread to WTI gets out of their range of expectations.  These guys want a stable price and to have that price be HIGH relative to the buyer's alternatives at all times.  Small wonder they are often disappointed.

My feeling is, it could have some impact if it falls into the favour of China, India and Russia. Transparency is an added value.

How do you get more transparent than an open outcry or electronic system like Access.  Every trade is done openly and recorded for all to see...Iran could easily sell all their oil either fixed price or on monthly averages relative to NYMEX settles.  Its almost impossible to manipulate a market for a whole month, especially one the size of the NYMEX.

Now if the Iranians want to try to cull the mkt of speculators they should be careful what they wish for.  Without liquidity it's very hard to keep an exchange afloat.