New Legislation Aims at Taming Energy Markets; Consumer Watchdog Decries Likely Lack of Senate, White House Support
Santa Monica, CA — U.S. Gasoline prices and crude oil markets were stuck near record highs again Monday as Consumer Watchdog continued a campaign to have consumers send their gasoline bills to Congress to spur action.
Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights) applauded the House of Representatives today for planning concrete steps to quell oil market speculation, which some members of Congress have urged for six years without success.
The nonprofit, nonpartisan Consumer Watchdog also urged drivers to sign an online letter that tells legislators and the White House what their last fill-up cost them and what gas prices are doing to the family budget. The letter calls for energy trading rules to bring down the price of crude oil and gasoline. (See the letter and announcement here.)
“Consumers get the idea that stopping market speculation is the one thing that could bring consumers and the economy relief this year, not 10 years down the road,” said Judy Dugan, research director of Consumer Watchdog. “Their personal gas bills give a dose of real life to lawmakers who have taxpayer-funded vehicles or large expense allowances that shield them from pain at the pump.”
Even some hedge fund managers now believe that speculation, not market forces, drives the price of oil, as do a growing number of independent analysts, said Consumer Watchdog. Michael Masters of the Masters Capital Management fund predicted Monday that better regulation of energy trading could cut crude oil prices in half within 30 days of enactment, “and gas prices would reflect that.” (See CNN story with full quote here.)
There are at least nine proposed bills aimed at regulating trading markets, chiefly by adding a dose of regulation to completely unregulated portions of the market, and by increasing the amount of money speculators have to put down to take part in trading. One mild bill to close what’s called the “Enron Loophole” in energy trading was passed into law this month, but putting it in force now depends on the White House, which has not supported such regulation.
“Some of the proposals in the House will certainly pass, but a Senate filibuster threat or a White House veto would stop them cold,” said Dugan. “When such simple, effective solutions as fair energy market rules get stopped by politics, the political process has lost all touch with the people back home.”
Consumer Watchdog and OilWatchdog.org have called for:
– White House action to sell some of the Strategic Petroleum Reserve, which contains the highest-demand, most expensive oil known as light, sweet crude.
– Closing the Enron Loophole in commodity trading regulation. A regulatory measure has been passed, overcoming a White House veto, as part of the federal farm bill. (See S.2058 by Democratic Senators Dianne Feinstein & Carl Levin.) Now it is up to a hostile White House to put the law into action. (See more on Enron Loophole and farm bill amendment here.)
– Increase in margin funds that traders must put up in energy markets to help suppress speculation. Currently, traders only have to put up 5% to 7% of the worth of the purchase, instead of the 50% required on stock trading. This makes it cheap to speculate.
– Senate approval of an alternative fuels bill funded by withdrawing $1.8 billion a year in unjustified taxpayer subsidies to oil companies. This measure, passed by the House, was not taken up in the Senate, where opponents used a filibuster tactic to require 60 votes for passage. A similar House measure was removed from the federal energy bill by the Senate last year under pressure from the oil lobby. (Find text of HR 5351 here.)
– Oversight of refinery operations, including regulation of national gasoline supplies. In the last decade, the average on-hand supply of gasoline has dropped from 30 days’ worth to about 22 days. This makes prices increasingly sensitive to any cuts in production. Only government regulation to control the supply of gasoline, nationally and regionally, will keep supplies adequate to control prices.
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