Senate, House introduce legislation to reign in oil speculation

By Luke Geiver | June 24, 2011

If legislation introduced by Sen. Bernie Sanders, I-Vt., is approved, the Commodities Futures Trading Commission will finally have to take more serious measures to stop oil speculation. Sanders pointed out during a recent speech in which he introduced the legislation that the Dodd-Frank legislation act passed last year required the CFTC “to impose strict limits on the amount of oil that Wall Street speculators could trade in the energy futures market,” adding that the legislation took effect in January. “Six months have come and gone,” he said, “and they have not done what they are required to do.”

Sanders' legislation, which was cosponsored by Sen. Bill Nelson, D-Fla., and five other senators, would require the chairman of the CFTC “to impose unilaterally position limits and margin requirements to eliminate excessive oil speculation, and to take other actions to ensure that the price of crude oil, gasoline, diesel fuel, jet fuel and heating oil accurately reflects the fundamentals of supply and demand.” The legislation goes on to say that those limits will “remain in effect until the date on which the Commission establishes position limits to diminish, eliminate, or prevent excessive speculation as required by title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

From Sanders’ perspective, the same Wall Street speculators that caused the financial crisis linking to the housing market are “at it again.” This time, however, he said, “They are ripping off the American people by gambling the price of oil and gas will continue to go up and up and up, and in that process, are driving that price of oil and gas up and up and up.”

The opinion of Sanders and the other senators who sponsored the legislation is not limited to just the Senate. Rep. Maurice Hinchey, D-N.Y., along with several other representatives, has introduced similar legislation in the House. Part of the legislation would require margin requirements forcing investors to have real capital in order to back their investments. The bill would also classify speculators as bank holding companies, investment banks or hedge funds.

Sanders also pointed out that today’s price of gasoline is roughly $3.69 a gallon, while supplies are greater and demand less than two years previous when gas was going for roughly $2.44 a gallon.

According to a release by Sanders’ office, energy experts from ExxonMobil, Delta Airlines and Goldman Sachs have said recently that excessive speculation “is responsible for 20 to 40 percent of the price of a barrel of crude oil.” 

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