CFTC chairman Gary Gensler is under mounting pressure to implement new rules in order to control speculators and reign in volatile spikes in the price of oil. (image: heatusa.com)
A group of 17 senators have hit out at financial regulators charged with reigning in commodity speculators and called for immediate action to control soaring oil prices.
In a joint letter this week to the Commodity Futures Trading Commission (CFTC), the senators criticized delays in imposing “position limits” on major financial traders who buy and sell oil contracts. They are demanding the new rules be implemented immediately to stop Wall Street traders gaming the system like “casino” gamblers at the expense of ordinary Americans.
The CFTC’s failure to act may again be saddling consumers with higher gas prices, higher food costs, and inflationary fears, all of which jeopardize our nation’s economic turnaround.
The letter says unchecked speculation is driving “wild and harmful oil price volatility, unwarranted Wall Street profits, and elevated gasoline and diesel prices at the pump.”
Heating oil consumers endured record winter fuel prices and motorist in some states are now paying over $4 a gallon for gasoline. And though the CFTC was mandated to implement new rules last year when Congress passed the Dodd-Frank financial reform bill, the regulations have repeatedly been pushed back amid fierce opposition from the finance sector.
A Republican bill currently before the House would further delay the regulations till early next year.
The Commodity Futures Trading Commission is charged with implementing new financial regulations as mandated under the Dodd-Frank act. (image: reuters.com)
The senators (15 Democrats, one Republican and one Independent) said the CFTC was required, not just authorized, to implement the position limits in energy commodities within 180 days of the bill’s July 2010 enactment “to protect consumers from excessive speculation and possible manipulation in the energy futures and swaps markets.” Its failure to do so was hurting ordinary Americans and signaled that powerful Wall Street financial interests were “succeeding in their efforts to water down Congressional-required boundaries on speculation in oil and commodity markets.”
Each day the CFTC fails to act increases the financial sector’s oil market profits, boosts the already substantial oil company windfalls, and enriches the treasuries of countries we import oil from – all harmful and unwarranted transfers of wealth directly from hardworking American families and businesses.
The senators called for the CFTC to impose position limits on oil traders immediately as required by law.
The letter is the latest in a growing chorus of demands for action by federal regulators amid soaring world oil prices, which have driven up the cost of home heating oil, gasoline, food and transported goods.
Heating oil dealers, who are rallying this week in Washington, wrote to a Congressional committee last week with similar demands. They warned that further delays would “preserve today’s artificially high commodity prices caused by excessive speculation in the derivatives markets.”
In a Star Tribune report this week, Rep Collin Peterson of Minnesota cited a study by Goldman Sachs investment bank. It found market manipulation added $27 to the price of a barrel of crude oil, costing consumers 33 cents per gallon at the gas pump.
Sean Cota is the president of the Petroleum Marketers Association of America. He believes unchecked speculation could lead to another commodities bubble and see price spike comparable to the 2008 crisis. (image: heatingoil.com)
But Petroleum Marketers Association of America president Sean Cota called the estimate “dramatically low.” Crude cost $45 a barrel to produce but was currently trading at about $100 a barrel, he said. Without regulation, he predicted an oil price bubble that could be more devastating than a 2008 spike when oil prices hit $140 a barrel.
With President Obama’s recent criticism of speculators’ influence over oil prices, CFTC regulators now face mounting pressure to implement the new rules. And without the regulations, heating oil users and dealers, motorists and consumers will remain vulnerable to volatile prices spikes in oil markets.
Click here to see the full text of the senators’ letter and its signatories.
