July 23, 2008

Whitehouse Urges Senate to Act to Bring Down Oil Prices

New Legislation Would Get Tough on Rampant Speculation in Energy Markets

Washington, D.C. – Cracking down on an explosion in speculative trading in energy markets could help lower prices at the pump, U.S. Senator Sheldon Whitehouse (D-RI) said on the Senate floor today. The Senate is debating legislation that would strengthen the federal government’s authority to oversee and investigate energy commodities markets.

“Families in Rhode Island and across the country are having to choose between filling their tank and feeding their families; between heating their home and buying needed medicine. They’re frustrated, and they’re angry, and they’re looking for solutions anywhere they can find them,” Whitehouse said. “We need real, common-sense solutions that can make a difference now.”

Speculators are Wall Street investors who buy and sell barrels of oil in order to make a profit. These traders never intend to use the oil, and in fact, never see a single barrel. They simply buy it and then sell to the highest bidder. This causes the price at the pump to creep higher and higher, with no end in sight.

According to data from the Commodities Futures Trading Commission (CFTC), speculators now control 71 percent of the oil market, up from 37 percent the year before President Bush took office. Walter Lukken, Acting Chairman of the CFTC, told CNBC in June that crude oil markets are “ripe for those wanting to illegally manipulate the markets.” Experts have estimated that speculation may have increased costs per barrel of oil by anywhere from 25 to 50 percent, and an official at the Consumer Federation of America testified that speculation has cost consumers an extra $1,500 in household energy expenditures.

To help correct the damage done by market speculation, Senate Majority Leader Harry Reid (D-NV) has introduced the Stop Excessive Energy Speculation Act (S. 3268). The bill would give the CFTC the tools it needs to combat the epidemic of speculation, adding 100 new “cops on the beat” to the commission’s staff, strengthening oversight, and shedding light on the role of index funds in driving up the price of energy.

Whitehouse has cosponsored a second measure, the Prevent Unfair Manipulation of Prices (PUMP) Act, which would set limits on investors’ ability to amass large positions in oil-related commodities and futures. Introduced by Senator Maria Cantwell (D-WA), a leader on energy policy, the PUMP Act would also close a number of loopholes to bring “offshore” and “over the counter” trading under the jurisdiction of U.S. regulators.

While Senate Democrats push for tighter limits on speculation, the Bush Administration and Republicans in Congress support expanding the number of public land leases available for energy companies to drill for oil. Whitehouse expressed concern today that opening up new leases would do little to lower prices at the pump, citing projections by the Energy Information Administration that this proposal would have an insignificant effect on the cost of gas. The United States owns three percent of oil reserves, yet consumes 25 percent of the world’s oil.

“The Administration and its allies have said that opening up more land to drilling is the one and only way to lower the price of gas in this country. They’re wrong,” Whitehouse said. “The energy companies have already bought up 68 million acres of public lands to drill – but they’re just sitting on it. They are spending more buying back stock than they are drilling these holdings. Now, rather than drill what they have, they want more. We cannot drill our way out of this problem, now or ever.”


Press Contact

Meaghan McCabe, (202) 224-2921