Senators scrutinize oil speculation
Democratic lawmakers are moving forward with efforts to get a handle on the degree to which market speculation may be driving up the price of oil. New Mexico's Jeff Bingaman joined five other Senators Thursday to introduce the “Increasing Transparency and Accountability in Oil Prices Act of 2008." The legislation would increase the ability of the Commodity Futures Trading Commission (CFTC) to regulate oil futures trading.
The bill would increase resources so that the Commission can hire an additional 100 employees to "detect, prevent, and punish price manipulation and excessive speculation."
It also addresses transparency and data collection by closing the "London Loophole" in order to prevent traders from routing oil trades through foreign exchanges to avoid oversight and regulation. And, it requires additional reporting plus a study of the current international regulatory structure in or to determine what should be improved.
The legislation follows on the heels of an open letter Bingaman sent the Commission as chair of the Senate Energy Committee in which he expressed concern that, among other things, the Commission undertakes its regulatory functions with a "glaringly incomplete data set":
I take seriously the testimony of oil industry analysts who have suggested that supply and demand for physical barrels of oil simply cannot fully explain today’s prevailing oil prices. Moreover, the lack of comprehensive oil trade data has hampered attempts to quantify the impacts of speculative investment on the prices now imposing hardships on American consumers.
In particular, I remain concerned that the Commission’s assertions to date -- discounting the potential role of speculation in driving up oil prices -- have been based on a glaringly incomplete data set. Increasing trading activity in U.S. crude oil takes place on foreign boards of trade (FBOTs) and in over-the-counter (OTC) markets, for which the CFTC has limited data and oversight authority.
He closed his letter with a series of detailed questions for the Commission, which he requested be answered by June 10.
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