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Future of Futures Speculation Bill Speculative

With Senate action on its Stop Excessive Speculation bill (S3268) apparently stalled, attention this week turns to a House version of legislation to extend the Commodity Futures Trading Commission's (CFTC) role in monitoring futures markets, which may make it to the floor before the Congress leaves for its August recess. After two days of rhetoric, the Senate Friday failed to muster the votes necessary to close debate.

At very great length Republicans harangued for broader energy legislation and Democrats remained very vocally steadfast against amendments to modify or expand the bill, which is aimed at reducing speculation in oil and natural gas futures markets by directing the CFTC to set position limits for pure speculators; close the loophole for U.S. traders on foreign exchanges; and expand reporting requirements into the over-the-counter realm of derivatives, swaps and index funds (see NGI, July 21). While aimed mainly at oil markets, it also calls for a study by the Federal Energy Regulatory Commission of financial institutions' impact on natural gas markets.

The Senate's 50-43 vote Friday was short of the 60 affirmative votes (three-fifths of the 100 senators) required to close debate. It came after two days of rhetoric characterized by Democrats blasting speculators for inflicting high oil prices on American consumers and Republicans countering with actions needed to address supply/demand fundamentals, including the lifting of a ban on exploration in the Outer Continental Shelf (OCS). The Democratic leadership firmly held out against allowing amendments, while Republicans said they had at least 28 amendments to offer.

On the House side the Agriculture Committee completed mark-up of its own bill to limit speculation, which possibly could face the same fate as the Senate measure. Since House Democratic leaders are just as opposed as their Senate counterparts to lifting the OCS ban, the bill would likely be brought to the floor under a rule that bars amendments and requires a two-thirds vote to pass it. It is not clear whether supporters of the measure have the necessary votes.

In the midst of the debate last week the CFTC released an interim staff report by a federal agency task force that found fundamental supply and demand factors, not speculation are largely the cause of escalating oil prices in the futures market (see related story). Meanwhile, it was noted that while the politicians generated heat in Washington the price of oil continued to drop.

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