Sen. Barack Obama (D-Ill.), the Democrats' presumed 2008 presidential nominee, announced a plan on June 22 to reduce excessive energy speculation and bring down record crude oil and gasoline prices.
Obama's four proposals are similar to several which congressional Democrats have made in bills introduced in the past two weeks. They emerged one day before the US House Energy and Commerce Committee's Oversight and Investigations Committee was scheduled to hold its second hearing on energy speculation and two days before the US Senate Homeland Security & Government Affairs Committee plans to hold a hearing on legislative options to end excessive speculation in commodity markets.
At least four bills addressing various aspects of energy speculation have been introduced already in the Senate. Joseph I. Lieberman (I-Conn.), who chairs the Homeland Security & Government Affairs Committee, is at work on another. On the House side of the Capitol, Bart Stupak, who chairs the subcommittee holding the June 23 hearing, introduced a broad bill on June 20 aimed at curbing excessive speculation. It followed one introduced three days earlier by Reps. Charlie Melancon (D-La.) and Jim Matheson (D-Utah), co-chairs of the moderate Blue Dog coalition of US House Democrats.
Obama focused mainly on repealing the 2000 Commodity Futures Modernization Act provision which allows the Commodity Futures Trading Commission to declare an energy commodity exempt from regulation – the so-called Enron loophole which critics say was slipped into the law at the 11th hour at the Houston diversified energy supplier's behest.
Dangerous regulatory gap
This creates a dangerous regulatory gap where the CFTC can't fully oversee the oil futures market, creating the potential for abusive trading and price manipulation, and the possibility that a large derivatives dealer's failure could trigger supply and price disruptions, Obama said. "My plan fully closes the Enron loophole and restores common-sense regulation as part of my broader plan to ease the burden for struggling families today while investing in the future," he said in a statement at his campaign's website.
He emphasized that a vibrant oil futures market can help producers and buyers hedge against price swings, but added that the absence of common-sense rules lets speculators undermine public confidence in the market's integrity. "For the past four years, our energy policy in this country has been simply to let the special interests have their way, opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay $4/gal for gasoline," he said.
Obama's three other proposals are aimed at preventing traders of US crude oil from routing their transactions through foreign exchanges to evade position limits and imposing reporting requirements on overseas exchanges for US commodity contracts; working with other countries through the International Organization of Securities Commissioners and other organizations to coordinate oil futures market regulation, and ordering the US Department of Justice and Federal Trade Commission to fully investigation oil futures market manipulation.
The energy commodity regulation proposals are part of Obama's broader plan which also includes re-imposing a windfall profits tax on major oil companies, repealing oil and gas tax incentives, cooperating with oil importing nations outside the International Energy Agency to reduce demand, investing in renewable and alternative energy research and development, and providing a $500 per person or $1,000 per family tax credit to help working families meet rising costs.
Congressional Democratic leaders have mentioned other proposals such as requiring the FTC to investigate and prosecute oil and product price gouging allegations. But the Blue Dog Democrats' support in the House and statements by Senate Republicans such as Ted Stevens (Ak.) and Susan M. Collins (Me.), the Homeland Security Committee's ranking minority member, suggest that energy commodity regulatory reform is most likely to move ahead.
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