As the price of gasoline edges nears the $4/gallon mark in much of the country and has surpassed it in some places on the West Coast, a group of senators Wednesday introduced legislation that calls on the Commodity Futures Trading Commission (CFTC) to use its emergency powers to rein in speculation in the futures markets.
Saying that the regulators have been dragging their feet on setting speculation limits in the market, the legislation would set a 14-day deadline for the Commission to implement position limit rules to prevent allegedly excessive speculation by Wall Street traders in futures markets.
“We need to take decisive action now to stop speculators who are driving up [gasoline] prices for all of us at a time we can least afford it,” said Sen. Ben Cardin (D-MD), one of the co-sponsors of the legislation.
“The CFTC has the power to stop this excessive speculation but has been dragging its feet. This legislation would direct the CFTC to take immediate action to reduce unnecessary speculation and give families some relief at the pump,” said Sen. Amy Klobuchar (D-MN), also a co-sponsor. The bill, which was sponsored by Sen. Bernie Sanders (I-VT), has six co-sponsors, all Democrats.
The CFTC needs to “set position limits on speculators like it was mandated to do in the [Dodd-Frank] Wall Street Reform law. The legislation we are introducing today would force the Commission to take that action,” said Sen. Al Franken (D-MN).
Last October the CFTC voted out a final rule that seeks to curb excessive speculation in commodity futures contracts and economically equivalent swaps. It establishes limits on speculative positions in 28 core physical commodity contracts, four of which are energy contracts: Nymex Henry Hub Natural Gas, Nymex Light Sweet Crude Oil, Nymex New York Harbor Gasoline Blendstock and Nymex New York Harbor Heating Oil (see Daily GPI, Oct. 19, 2011).
The Commission, however, has yet to implement the rule, At a hearing Wednesday before a Senate Appropriations subcommittee, Gensler said the rule wouldn’t go into effect until the agency defines what a “swap” is, and until it collects more information on position limits in the derivatives market (see Daily GPI, March 22).
The recent surge in crude oil prices is widely attributed to speculators that control more than 80% of the energy futures market, according to Sanders. The oil prices have in turn pushed up the price of gasoline, which stood at a national average of $3.84/gallon on Tuesday.
The Senate legislation calling on the CFTC to use its emergency powers is identical to a bipartisan bill that overwhelmingly clear the House by a vote of 402-19 during a similar crisis in 2008, Sanders noted.
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