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Senators weigh in on commodity lawsuit They say Congress meant for regulators to impose trading limits to curb ‘excessive speculation’ on oil; Obama offers get-tough plan Wesley Loy For Petroleum News
Alaska’s Mark Begich is among 19 U.S. senators, all Democrats, jumping into a federal lawsuit concerning regulation of possible “excessive speculation” in commodity markets.
The action comes amid a rising election year backlash over high gasoline prices across the nation. On April 17, President Barack Obama announced a five-part plan to strengthen oversight of energy markets and safeguard against what the White House called “illegal manipulation, fraud and market rigging.”
The president’s plan centers on providing more manpower and technology to the Commodity Futures Trading Commission.
“I’m pleased the Obama administration is finally proposing tough new actions to rein in oil speculators, whose actions have slowed our economic recovery,” Begich said in an April 17 press release. “It’s easy to blame ‘big oil’ for high oil prices, but in fact it’s the largely unregulated speculators who drive up prices, forcing many drivers in Alaska and across the country to pay more than $4 a gallon for gas. The cost of speculation is estimated at 56 cents for every gallon of gas.”
Court brief filed On April 13, Begich and 18 of his Senate colleagues filed an amici curiae or “friends of the court” brief in a lawsuit now pending in U.S. District Court in Washington, D.C.
Two trading industry groups, the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association, sued the CFTC in an effort to block a new regulation to impose position limits on the trading of commodities on U.S. markets, a Begich press release said.
A key issue in the suit is whether Congress, in passing the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, mandated that the CFTC establish position limits or merely gave the agency the option to do so if needed.
The intent of position limits is to restrict the ability of any single trader to manipulate oil markets.
“High gasoline prices are choking our economic recovery,” said Michigan Sen. Carl Levin, who led the effort to file the amici brief. “Oil supplies are plentiful and demand is down, so high gas prices can’t be explained by ordinary market forces of supply and demand. An ongoing contributing factor is excessive speculation in U.S. commodity markets. Two years ago, the Dodd-Frank Act directed the CFTC to clamp down on excessive speculation by imposing trading limits on speculators, and the CFTC issued a new regulation to do just that. The financial industry slapped the CFTC with a lawsuit claiming Congress never meant for the trading limits to prevent excessive speculation to be mandatory, but our amicus brief shows that is exactly what we meant and what the law requires.”
Aside from Levin and Begich, other senators signing onto the amici curiae brief included Richard Blumenthal of Connecticut, Barbara Boxer of California, Sherrod Brown of Ohio, Maria Cantwell of Washington, Ben Cardin of Maryland, Dianne Feinstein of California, Tom Harkin of Iowa, Patrick Leahy of Vermont, Joe Manchin of West Virginia, Claire McCaskill of Missouri, Robert Menendez of New Jersey, Barbara Mikulski of Maryland, Bill Nelson of Florida, Bernie Sanders of Vermont, Jeanne Shaheen of New Hampshire, Sheldon Whitehouse of Rhode Island and Ron Wyden of Oregon.
Obama’s plan, and reaction Obama’s five-part plan includes a request that Congress fund more “cops on the beat” to oversee oil markets. He wants “at least a six-fold increase in the surveillance and enforcement staff for oil futures market trading at the CFTC,” a White House fact sheet said.
The president also wants funding for information technology upgrades at the CFTC to “strengthen monitoring of energy market activity.”
And Obama proposed “a ten-fold increase in maximum civil and criminal penalties for manipulative activity in oil futures markets.”
House Speaker John Boehner, R-Ohio, panned the Obama plan as a “gimmick.”
“The White House can’t produce one shred of evidence that this manipulation is taking place. And if they thought it was taking place they have the tools and the laws already in place to go after it,” Boehner said.
American Fuel & Petrochemical Manufacturers, a trade association, said this:
“To the extent that there is any manipulation in the marketplace, the government should investigate and take corrective actions. Historical data shows speculators are not the primary force impacting prices at the pump. In fact, U.S. refiners count on financial markets to hedge against potentially higher crude oil costs, which work to prevent consumer costs from increasing further.
“We have vast untapped resources under our feet and off our shores and available from our good friend and neighbor Canada via the Keystone XL pipeline. If the president is serious about meeting our energy and national security needs, it’s time we take the appropriate steps to increase our North American oil and natural gas production and bring our nation back to economic prosperity.”
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