Posted on 03/05/2012 9:13:32 AM PST by Sub-Driver
Dems blame Wall Street for high gas prices, urge CFTC action By Ben Geman - 03/05/12 08:39 AM ET
Dozens of House and Senate Democrats are urging federal regulators to implement limits on speculative trading in energy futures markets that the lawmakers call a major factor behind the run-up in gasoline prices.
A letter Monday to the Commodity Futures Trading Commission (CFTC) from 23 senators and 45 House members underscores how gas prices have soared to the top of the political agenda on Capitol Hill and the campaign trail.
“It is one of your primary duties — indeed, perhaps your most important — to ensure that the prices Americans pay for gasoline and heating oil are fair, and that the markets in which prices are discovered operate free from fraud, abuse and manipulation,” states the letter from lawmakers including Sens. Bernie Sanders (I-Vt.), Bill Nelson (D-Fla.) and Ron Wyden (D-Ore.) and Reps. Maurice Hinchey (D-N.Y.) and Louise Slaughter (D-N.Y.).
The March 5 letter to the CFTC bashes the regulators for failure to implement rules finalized last October that establish “position limits” on the amount of futures and swaps contracts for oil and other commodities that traders may hold.
The limits are required under the sweeping 2010 Wall Street reform law. “As the cost for American people to fill their gas tanks continues to skyrocket, the CFTC continues to drag its feet on imposing strict speculation limits to eliminate, prevent or diminish excessive oil speculation as required by the Dodd-Frank Act,” the letter states.
“Although the CFTC has adopted initial position limits, they are not strong enough and not yet in force owing to industry opposition, delays in swaps oversight and data collection. This is simply unacceptable and must change,” it states.
House and Senate Democrats are increasingly citing Wall Street speculation to counter GOP election-season political attacks over gas prices.
Republicans, amid the recent run-up, have upped calls for a major expansion of offshore oil-and-gas leasing, opening the Arctic National Wildlife Refuge to oil development, approval of the Keystone XL oil sands pipeline and other steps.
Regular gasoline prices are now averaging $3.77 per gallon nationwide, compared to $3.48 a month ago and $3.50 at this time last year, according to AAA.
The Democrats’ new letter makes the case that prices at the pump are far above what supply-and-demand fundamentals should dictate.
From the letter:
According to the Energy Information Administration, the supply of oil and gasoline is higher today than it was three years ago, when the national average price for a gallon of gasoline was just $1.90. And, while the national average price of gasoline is now over $3.70 a gallon, the demand for oil in the U.S. is at its lowest level since April of 1997. Nor is the global supply of oil at issue. According to the International Energy Agency, in the last quarter of 2011 the world oil supply rose by 1.3 million barrels per day while demand only increased by 0.7 million barrels per day. Yet, during this same period, the price of Texas light sweet crude rose by over 12%. Meanwhile, oil speculators now control over 80 percent of the energy futures market, a figure that has more than doubled over the past decade.
Now they want price controls. Yeah, that’ll fix everything. It worked so well when Nixon did it.
are you going to let the democrats get away with THIS whopper, GOP?
Hrm...I notice they didn’t mention how much of that per gallon price is State and Federal taxes.
Next, the Left will bring back Disco, leisure suits and cocaine parties, and the '70s revival will be complete.
Fact: There are two people to blame for high gasoline prices, period!!! POTUS Barack Hussein Obama, and the entire Democrat Party!!! End of story!!!
They can't hear you. They're cowering somewhere, afraid that someone might ask them to defend free enterprise.
If Baraq would just give the poor people “fuel stamps” this crisis could be solved.
Can you believe a bunch of these people will be re-elected this fall (and it won’t even be close)?
and sit down.
two or three of those and the lamestream would HAVE to blare it all over whatever, and when Hannity or anyone interviews that critter, and asks what did he or she mean, just reply, "'Cause what the democrats said/offered/proposed (whatever) is bullshit"
Let the airwaves reverberate with the sound of bullshit.
The HILL is aliiiiiive, with the sound of BUUULLLL shit
The Democrats have done everything they can to raise gas and electric prices.
I would prefer that someone stand up and call the liars "liars", and the communists "communists". But that presupposes the sudden development of vertebrae and testicles among many who famously lack both.
LLS
The Fed already has gas cards for those that are unemployed and “qualify”.
LLS
What bull!
Oil prices are the result of this administrations failed monetary policies and failed energy policies....in that order.
Let's look at The U.S. Commodity Exchange Act of 1936: "Excessive speculation in any commodity under contracts of sale of such commodity for future delivery ... causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity." If goes further to establish the potentialities for position limits &c. Either this is to be enforced or it has no purpose being there.
The last thirty dollars, at least, during that 2008 run-up was purely long speculators ganging up on SemGroup. They knew SemGroup was short and they literally killed the company. Within hours of SemGroup declaring bankruptcy and surrendering its positions to Barclays, oil began the even more insane drop to the sub-$30 level that is currently dishonestly being used as a benchmark for crude and gas prices. It can't be argued that that wasn't "excessive speculation"; it needed only the kind of enforcement of the relevant portions of the 75-year-old Act that is being talked about in the original post.
I don't accept that commodity markets, particularly crude oil, natural gas, and unleaded gasoline, these days, are lliquid without the likes of, for example, the California Public Employees Retirement System applying their "expertise" of the economics of the world market for crude oil. It's easy to conceive of a no-bid situation in the stock market; a company can become worthless overnight. But even an agricultural commodity, possibly because it's the only thing traded in any U.S. market that actually has intrinsic value, can't become worthless under the current system. That's why the exchange was created -- to make sure that wheat wouldn't rot in the fields.
If, as you say, there were no specs, as price rises, why would an "actual user" sell their position? Did that airline buy that fuel for its own use or didn't it?
Finally, if most speculators are ground up and spat out, and speculation is a zero-sum game, it follows that a few speculators clean up. That outcome is not, never was, and cannot be the purpose of a commodity market.
I just remembered two more textbook inversions of the "speculators provide liquidity and price stability" canard: the first one is the infamous Goldman-Sachs readjustment of their own tradeable commodities index in 2006, where they woke up one morning and decided that Unleaded Gasoline should not be 8.7% of the portfolio, but 2.5%. Here's how that "provided" liquidity and price stability, and by "provided", I mean "utterly and instantly destroyed":
"...Goldman Sachs significantly readjusted in August of that year [2006] the GSCI's gasoline weighting. Index products tracking the GSCI, and representing an estimated $60 billion in institutional investor funds, were forced to rebalance their portfolios resulting in an unwinding of positions. Originally, unleaded gasoline made up 8.75 percent of the GSCI as of 6/30/2006, but this was changed to just 2.3 percent, representing a sell-off of more than $6 billion in futures contracts.
"As a result, gasoline fell 82 cent in the wholesale market over a four-week period, an unprecedented move; and crude oil, which in July 2006 traded over $79 per barrel for August delivery—at the time an all-time record—subsequently fell to around $56 by January 2007."
http://www.marketoracle.co.uk/Article4526.html
I leave the matter of the clear culpability of speculators for the worldwide food riots of 2008 for another post.
The call is for position limits, not price controls.
yeah, they’ve always been satisfied with the scraps from the democrats’ table haven’t they.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.