SHAHEEN: EXCESSIVE ENERGY SPECULATION PUTS UNFAIR BURDEN ON AMERICAN FAMILIES AND BUSINESSES
Calls on Commodity Futures Trading Commission (CFTC) to set limits on speculations
(Washington, D.C.) - U.S. Senator Jeanne Shaheen (D-N.H.) today reiterated her call for the Commodity Futures Trading Commission (CFTC) to act quickly to set limits on speculation in energy markets in light of recent gas price spikes. Increased speculation can lead to artificially high gas and home heating prices, putting an unnecessary burden on American families and businesses.
"With gas prices higher than they’ve been in years, the CFTC must act now to prevent speculation from harming American consumers and small businesses," said Shaheen. "The last thing American families and businesses need right now is for Wall Street speculation to hurt their bottom lines."
The price of a barrel of crude oil remains at over $100 per barrel and the cost of a gallon of gas has risen over 38 cents in the last month. Speculation has also surged in recent months. Earlier this month, it was reported that the largest trading firms have nearly twice as many long contracts open on oil as they did in 2008, when the price of oil hit its peak price of $147 per barrel.
The Wall Street Reform and Consumer Protection Act of 2010 requires the CFTC to establish hard limits on speculation in energy commodities such as crude oil. The CFTC proposed a rule earlier this year and the rule closed for comment yesterday. Shaheen sent a letter yesterday to the Chairman and Commissioners of the CFTC calling for its immediate implementation.
Shaheen has worked to curb excessive speculation during her time in the Senate. Earlier this month, she wrote a letter to the CFTC asking for an assessment of speculation’s role in the price spikes and the potential effects of proposed cuts to the agency in the House Republican spending bill. In January, Shaheen wrote a separate letter to the agency asking it to move quickly to establish hard limits on speculation in energy commodities, as required by the 2010 Wall Street Reform bill. This January letter was sent before the CFTC proposed its rule.
The full text of the Senator’s most recent letter, sent to the CFTC yesterday, is below.
March 28, 2011
The Honorable Gary Gensler
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW, Room 9060,
Washington, DC 20581-0001
Dear Chairman Gensler and Commissioners Dunn, Sommers, Chilton and O’Malia:
I am writing to reiterate my support for the adoption of hard speculation limits to prevent excessive speculation and price distortion in commodities markets. Congress required these speculation limits in last year’s Wall Street Reform bill to prevent speculators from causing volatility in the price of commodities such as oil that are critical to the bottom lines of American consumers and businesses.
Since I last wrote the Commission in advance of the proposed rule in January, we have seen a dramatic increase in the price of crude oil and gas at the pump. The price of a barrel of crude oil remains at over $100 per barrel and the cost of a gallon of gas has risen over 38 cents in the last month. American businesses and consumers are once again faced with an alarming surge in the price of energy, including gasoline, diesel fuel and home heating oil. This translates to higher costs to travel to work or school, to heat their homes and to run their small businesses.
In recent months, there has also been a drastic increase in the amount of speculative trading of crude oil derivatives on Wall Street. The largest trading firms have engaged in what some observers have called a “speculative fervor.” They have nearly twice as many long contracts open on oil as they did in 2008, when the price of oil hit its peak price of $147 per barrel.
With both oil prices and speculation on the rise, it is essential that the Commission adopt hard speculation limits as Congress required in the Wall Street Reform legislation. While the price of gas is tied to many factors, many experts agree that excessive speculation has historically played a role in artificially driving up the price of gas at the pump. Congress required speculation limits to avoid the recent attempts by speculators to profit by artificially driving up the price of oil and, as a result, hurting the bottom lines of American households and threatening our still fragile economic recovery.
I understand that the Commission has a number of actions to take to bring transparency and begin regulating shadowy derivatives markets. However, I hope the Commission will make adoption of hard speculation limits a priority. The Commission has already missed a deadline provided by Congress to establish these limits. Recent events have underscored the need for speculation limits as soon as possible.
I was pleased to see that the Commission published a proposed rule that would establish speculation limits. The final rule must ensure that the implementation of these limits is effective in meeting Congress’ intent to eliminate excessive speculation that distorts prices for end-users and consumers. As you finalize the rule, I urge you to carefully consider the comments of end-users and consumers, who directly feel the effects of excessive speculation.
In the coming weeks, I also urge you to remain vigilant and take action when appropriate to prevent excessive speculation from contributing to uncertainty and unnecessarily high prices for essential items like gasoline and home heating oil.
United States Senator
Press Office, (202) 224-5553