The proposed Volcker rule crackdown on trading and investing by banks could cause gasoline, electricity and natural gas prices to rise, according to a new report.
The report, released on Wednesday by business information provider IHS Inc IHS.N, seeks to gauge the rule's impact on energy companies and markets, including oil refineries, natural gas producers and electricity providers.
The study was commissioned by investment bank Morgan Stanley (MS.N), which stands to be a big loser under the trading crackdown, but IHS researchers said they maintained complete control over the study and its conclusions.
The report's authors said large banks play a key role in helping a variety of energy companies hedge risk and engage in timely trades on commodity exchanges.
Any reduction in the banks' ability to play this role because of the Volcker rule will cause the cost of doing business to rise, according to the report, and that will lead to higher energy prices for consumers.
"You are going to eliminate the flywheel that makes the system work," IHS CERA Chairman Daniel Yergin, one of the report's authors, said in an interview.
The rule is a controversial part of the 2010 Dodd-Frank financial oversight law and it prevents banks from trading with their own capital and greatly restricts their investments in hedge and private equity funds.
The Volcker rule, an initial proposal of which was released by regulators in October, exempts trades done on behalf of clients or to hedge portfolio risk, but critics are concerned such exceptions may not work in practice.
Among the report's specific findings are that under the Volcker rule there could be 200,000 fewer energy sector jobs than projected between 2012 and 2016, gasoline prices on the East Coast could rise by 4 cents a gallon and investment in natural gas development could decrease.
The IHS report says the exemptions in the final rule, expected later this year, need to be broadened to avoid negative impacts on energy companies.
"The economic analysis demonstrates the possible unintended consequences that the proposed rule, in its current form, could have on broader segments of the U.S. economy," Kurt Barrow, another author of the report, said in a release.
Morgan Stanley and other big Wall Street banks have been lobbying regulators to ease up on the restrictions that policymakers have said are needed to reduce excessive risk taking by banks that rely on federal backstops such as deposit insurance and access to Federal Reserve loans.
Banks have sought to get industries outside the financial sector to express concerns about the rule to help sway regulators that complaints are not confined to Wall Street's executive suites.
Some officials, however, have expressed skepticism at studies commissioned by the banking industry.
"I think we all need to be a little bit wary of the false precision that sometimes is associated with analytical advocacy," Fed Governor Daniel Tarullo said at a U.S. House of Representatives hearing in January.
(Reporting By Dave Clarke and Ayesha Rascoe; Editing by Steve Orlofsky)