As the US Senate prepared to debate its latest oil tax bill on June 10, many members of Congress opened fire on so-called Big Oil, their target whenever retail gasoline prices soar and voters start to complain.
But energy politics acquired a new dimension the past few months as House and Senate members started to blame market speculators as well. So Walter L. Lukken, the Commodity Futures Trading Commission’s acting chairman, can be forgiven if he feels that he’s also under the gun.
His nomination as CFTC chairman could be in trouble. Sen. Byron L. Dorgan (D-ND), who compares loosely regulated commodity exchanges to gambling casinos, announced that he would oppose. He said Lukken has not kept oil market speculators in line.
That same day, Sens. Olympia J. Snowe (R-Me.), Dianne Feinstein (D-Calif.), Ted Stevens (R-Alas.), Maria Cantwell (D-Wash.), and Ron Wyden (D-Ore.) jointly urged the CFTC to exercise emergency authority to require disclosures by institutional investors who use swaps dealers.
‘Massively different’
Although effects of the recent price increases are similar to those of past crises, Snowe said, “Speculation is massively different, and we must ensure that these markets are properly working and not subject to manipulation.”
The CFTC has moved carefully in the last year. It investigated allegations that traders were buying US crude oil commodities on London’s Intercontinental Exchange. ICE agreed to institute requirements matching those on the New York Mercantile Exchange.
The commission also formed an energy-markets advisory committee in February to examine issues in those markets and the CFTC’s role in regulating them. Members include representative from energy and commodities trade associations, institutional investors, oil and commodities traders, and energy consumers.
‘Cooperation and coordination’
On June 10-11, the CFTC brought senior enforcement officials from other countries’ commodity-market regulatory agencies to Washington for its second annual antimanipulation conference. “Since no global regulator exists, it is critical that the international sister agencies continue cooperation and coordination to ensure market integrity,” CFTC Enforcement Director Gregory Mocek said.
But the agency’s most significant move may have been on May 29 when it disclosed that its enforcement division has been investigating crude oil and derivatives markets since December. It also said overseas commodities regulators could require fuller disclosures.
Several congressional critics weren’t satisfied. “The CFTC has not proposed how to close off the loopholes that allow commodity index funds and others to take such massive positions that possibly distort oil futures markets,” House Energy and Commerce Committee Chairman John D. Dingell (D-Mich.) said.
Richard J. Durbin (D-Ill.), the Senate’s majority whip, noted that by 2009 the CFTC will be required to oversee around 980 million futures transactions, which are becoming increasingly complex, yet its workforce has shrunk from 546 to 475 employees since 2000. Congress should give it money to increase its commodities market enforcement “and ensure that these extra resources are applied,” he said.