Stupak offers new bill to attack excessive oil market speculation

Citing the harmful impacts record high crude oil prices are having on consumers, US Rep. Bart Stupak (D-Mich.) introduced a bill to close regulatory loopholes which he said have allowed commodity speculators to push oil prices upward and profit from the increase.

"For the past three years, I have been looking into the excessive speculation occurring on the energy markets. I have done more than just scratch the surface; I've really delved deep into this issue to understand the extent to which market speculation is inflating the price of crude oil," he told reporters before heading to the House floor to introduce the bill.

Stupak, who chairs the Energy and Commerce Committee's Oversight and Investigations Subcommittee, said that he has more than 50 co-sponsors, including several Republicans, for the legislation which would place all energy commodities under the Commodity Futures Trading Commission's oversight. This effectively would end exemptions allowed under the 2000 Commodity Futures Modernization Act.

It also would stipulate that if an energy transaction provides for a US delivery point or is traded on a computer terminal located in the United States, it would be subject to the same rules which currently apply to commodities trading on the New York Mercantile Exchange, including large trader reporting, record-keeping and prohibitions against fraud and market manipulation. This would apply to designated contract markets, energy trading facilities in the US, bilateral trades and trades transacted on a foreign board of trade, Stupak said.

The bill also would amend sections of the Commodity Exchange Act by extending federal regulatory authority to swaps involving energy transactions and to energy transactions on foreign boards of trade. It also would require the CFTC to establish aggregate position limits on energy contracts for a trader over all markets.

Larger initiative possible

"We're not saying end speculation. We're saying end excessive speculation," Stupak said, adding that he has been in touch with House Speaker Nancy Pelosi (D-Calif.) and that his bill, which he said is the broadest introduced so far, may become part of a House Democratic initiative following the Independence Day recess which could include other bills dealing with oil product price gouging and oil and gas producers not developing their federal leases.

He was joined at the briefing by two of the bill's Democratic co-sponsors, Jay Inslee (Wash.) and Peter Welch (Vt.), who said that the legislation's enactment would be the best immediate step Congress could take to cool off overheated energy markets. "The day this bill passes, it will signal the markets that excessive speculation won't be tolerated. It won't be the only thing we can do, but right now it's the best thing," Inslee said.

Welch said that oil companies have consumers "coming and going" by not only refusing to drill leases but also by speculating in commodities markets. "This bill asks if Congress will squeeze speculators or let speculators continue to squeeze us," he said.

Stupak and Inslee both said that recently soaring crude oil prices reminded them of dramatic increases in Western US wholesale electricity prices in 2001 which were later traced to manipulation by traders at Enron Corp. "I've seen this bad movie before. It's the Enron movie, which hit the West Coast power markets like a bomb because the federal government was asleep at the switch. It has happened again with oil prices," Inslee said.

'Numbers back this up'

Stupak said that while Treasury Secretary Henry M. Paulson and the CFTC won't acknowledge that excessive speculation is part of the high oil price problem, others from the International Monetary Fund to Saudi Arabia's oil minister have said that it is. "The numbers back this up: Between Sept. 30, 2003, and May 6, 2008, contracts held by traders jumped from 714,000 to more than 3 million, a 425% increase. Since 2003, commodity index speculation has increased 1,900% from an estimated $13 billion to $260 billion invested," the House member said.

He said that CFTC data show that in 2000, physical hedges which airlines and other businesses use to ensure a stable price for fuel in coming months and actually imply delivery, accounted for an estimated 63% of the total futures market while speculators represented about 37%. "By April 2008, physical hedgers only controlled 29% and speculators had taken over a whopping 71% of the oil futures market," Stupak said.

He said that 85% of the futures purchases tied to commodity index speculation comes through swap dealers, which are investment banks that serve as intermediaries for their pension fund and sovereign wealth fund customers. One report found that $55 billion of total worldwide commodity trading over 55 days came in as swaps, according to Stupak. "The CFTC has allowed 117 exceptions to swaps. When that many exceptions are allowed, they are not really subject to oversight. We have a CFTC that's supposed to be doing its job. I'm not certain that it is," he said. Acting CFTC Chairman Walter L. Lukken is among the witnesses scheduled to testify on June 23 at the latest hearing on oil markets and speculation by Stupak's subcommittee.

Inslee said that many energy commodity trades currently take place beyond the CFTC's oversight. "If you don't have transparency, you have excessive speculation. We learned from Enron that if you don't have transparency, you have the potential for manipulation," he said.

Asked if he intended to press his legislation if crude oil prices start to drop, Stupak said that he does. "We have not spent three years looking at this not to. Rep. Inslee and I were here for the Enron debacle and we're tired of seeing it happen. There's clearly a bubble here that's about to burst. This bill will do more to make it happen than anything the Chinese government could do," he said, referring to China's announcement the previous day that would raise domestic fuel prices by up to 18%.

Contact Nick Snow at

Related Articles

DOI proposes Arctic-specific drilling regulations for Alaska OCS

02/20/2015 The US Department of the Interior proposed regulations to ensure that oil and gas exploration on the US Arctic Continental Shelf occur safely and r...

More pragmatism urged for developing Eastern Mediterranean gas

02/20/2015 Eastern Mediterranean nations should abandon inflated expectations and adopt more realistic approaches to developing their natural gas resources, s...

Murkowski, Heitkamp lead Senate call for crude exports to Mexico

02/18/2015 US Sens. Lisa Murkowski (R-Alas.) and Heidi Heitkamp (D-ND) led a coalition asking US Sec. of Commerce Penny Pritzker in a Feb. 18 letter to encour...

Pemex cuts budget by $4 billion

02/18/2015 The board of Petroleos Mexicanos (Pemex) has approved a $4-billion budget reduction for 2015, an 11.5% decrease compared with the previous expendit...

US should rework Azerbaijan relations carefully, House panel told

02/18/2015 The US should pursue relations with Azerbaijan that recognize its strategic importance as an energy supplier to countries farther west but do not i...

Comments sought on Pinedale Anticline gas field noise report

02/18/2015 The US Bureau of Land Management’s Pinedale Anticline Project Office (PAPO) is seeking public comments on a 2014 acoustic noise report on sound lev...

Ohio Supreme Court rules against municipality in oil and gas case

02/17/2015 The Ohio Supreme Court ruled that the city of Munroe Falls cannot impose local drilling and zoning ordinances that conflict with Ohio state law reg...

Uganda taps Russian firm to build country’s first refinery

02/17/2015 The government of Uganda has selected a consortium led by Russia’s RT Global Resources, Moscow, as its first choice to construct the country’s firs...

Montana governor wants PHMSA to beef up pipeline enforcement in state

02/17/2015 Citing a Jan. 17 leak of 1,200 bbl of crude oil from a ruptured pipeline in eastern Montana, Gov. Steve Bullock (D) asked US Sec. of Transportation...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts

The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.


On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected