A broad coalition of energy consumers last Wednesday called on President Bush to address the hot-button issue of "excessive" speculation in energy markets when he meets with world leaders at the G8 Summit in Japan July 7 through July 9.
"Our groups represent the most vital sectors of the U.S. economy, including agriculture, air travel, energy distribution and storage, gasoline and diesel fuel retail, heating fuel retail and service, trucking, manufacturing, small businesses and household consumers. The huge spike in energy costs is drastically affecting our industries, trades and consumers," the Energy Market Oversight Coalition wrote in its letter to Bush and the congressional leadership, as well as the Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission, Federal Energy Regulatory Commission, Federal Trade Commission and other agencies.
"We rely on the futures markets in order to provide stability and risk management, and we count on these markets to determine a fair price for energy commodities based on basic fundamentals. We believe these markets do not fully reflect essential supply and demand forces. Irrational and excessive speculation is now a driving force behind the pricing of energy commodities," the group said.
"The extent to which these markets have become 'disconnected' from economic fundamentals and the degree to which runaway speculation is driving the markets are matters of some contention" on Capitol Hill. However, one thing is clear: "speculators are now the dominant force in the energy futures markets, eclipsing the presence of physical hedgers in these critical markets," the coalition said.
"Our groups believe in open, stable and vibrant free markets...[But] not all energy commodities trades and trading environments are subject to the transparency and anti-manipulation rules of the Commodity Exchange Act and to the oversight of federal regulators, and, in fact, some trading is completely opaque and is afforded blanket regulatory exemptions. How are we to have confidence in markets that operate in the dark and without oversight?"
At the summit, "we are hopeful that G8 leaders will consider new intergovernmental cooperation in the oversight of global energy trading. An international monitoring regime will help to ensure full transparency, accountability and anti-manipulation measures across all energy futures trading environments and mechanisms."
The coalition also called on the president to order CFTC Acting Chairman Walter Lukken to address speculation in the U.S. energy markets by increasing regulatory oversight and enforcement; and to sign into law any legislation that strengthens the CFTC's authority and resources and closes all trading loopholes.
"Mr. President, we are looking to you for action...Please see to it that the cost of energy -- the lifeblood of the American economy -- is reconnected to economic realities, and that the artificial demand created by 'paper traders' [is] limited to ensure rational behavior in the futures markets," the coalition said.
Members of the coalition include the Agricultural Retailers Association, American Trucking Association, Air Transport Association, Consumer Federation of America, Gasoline and Automotive Service Dealers of America, Independent Oil Marketers Association of New England, Industrial Energy Consumers of America, Mid-Atlantic Petroleum Distributors' Association, National Association of Truck Stop Operators, National Association of Oilheating Service Managers, National Consumer Law Center, National Farmers Union, New England Fuel Institute, Pacific Northwest Oilheat Council, Petroleum Marketers Association of America, Petroleum Transportation & Storage Association, Public Citizen, Renewable Fuels Association and Western Petroleum Marketers Association.
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