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Letter to Regulators to Curb Oil Speculation

Letter to Regulators to Curb Oil Speculation

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Published by Tom Udall
Seventy members of Congress call on federal regulators to address oil speculation contributing to a rise in the price of gasoline.
Seventy members of Congress call on federal regulators to address oil speculation contributing to a rise in the price of gasoline.

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categoriesTypes, Letters
Published by: Tom Udall on Mar 06, 2012
Copyright:Attribution Non-commercial

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01/08/2014

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TheHonorableGaryGenslerChairmanCommodityFuturesTradingCommissionThreeLafayetteCentre
1155
21stStreet,
NW
Washington,DC20581TheHonorableMarkWetjenCommissionerCommodityFuturesTradingCommissionThreeLafayetteCentre11552[stStreet,NWWashington,DC20581TheHonorableScottO'MaliaCommissionerCommodityFuturesTradingCommission
Three
LafayetteCentre115521stStreet,NWWashington,DC20581March5,2012TheHonorable
Bart
ChiltonCommissionerCommodityFuturesTradingCommissionThreeLafayetteCentre
115521
stStreet,NWWashington,DC20581TheHonorableJillSommersCommissionerCommodityFuturesTradingCommissionThreeLafayetteCentre115521stStreet,NWWashington,DC20581DearChairmanGensler,andCommissionersChilton,Wetjen,Sommers,andO'Malia:WearewritingtourgeyoutoimmediatelyenactstrongpositionlimitstoeliminateexcessiveoilspeculationasrequiredbytheDodd-FrankWallStreetReformandConsumerProtectionActof2010.Asyouknow,theDodd-FrankActmandatedthatyouragencypromulgateandenforcesuchlimitsnolaterthanJanuary17,2011.Wearedisappointedthat,morethanayearlater,theCommissionhasnotfulfilledthisimportantregulatoryduty.CongressdeterminedthatspeculativepositionlimitsareaneffectiveandcriticallyimportanttooltoaddressexcessivespeculationinAmerica'soilandgasolinemarkets.Itisoneofyourprimaryduties=indeed,perhapsyourmostimportant--toensurethatthepricesAmericanspayforgasolineandheatingoilarefair,andthatthemarketsinwhichpricesarediscoveredoperatefreefromfraud,abuse,andmanipulation.Therehasbeenamajordebateoverthelastseveralyearsastowhetherspikesinoilpricesarecausedentirelybythefundamentalsofsupplyanddemandorwhetherexcessivespeculationintheoilfuturesmarketisplayingamajorrole.Itiscleartousthatdebatehasended.ExxonMobil,GoldmanSachs,theSaudiArabiangovernment,theAmericanTruckingAssociation,DeltaAirlines,thePetroleumMarketersAssociationofAmerica,andeven'areportlastyearfromtheSt.LouisFederalReservehaveallindicatedthatexcessiveoilspeculationsignificantlyincreasesoilandgasolineprices.AccordingtoaFebruary27,2012
)j
~~
 
articlein
Forbes,
excessiveoilspeculation"translatesoutintoapremiumforgasolineatthepumpof$.56agalion"basedonarecentreportfromGoldmanSachs.Thefactsbearthisout.AccordingtotheEnergyInformationAdministration,thesupplyofoilandgasolineishighertodaythanitwasthreeyearsago,whenthenationalaveragepriceforagallonofgasolinewasjust$1.90.And,whilethenationalaveragepriceofgasolineisnowover$3.70agallon,thedemandforoilintheU.S.isatitslowestlevelsinceAprilof1997.Noristheglobalsupplyofoilatissue.AccordingtotheInternationalEnergyAgency,inthelastquarterof2011theworldoilsupplyroseby1.3millionbarrelsperdaywhiledemandonlyincreasedby0.7millionbarrelsperday.Yet,duringthissameperiod,thepriceofTexaslightsweetcruderosebyover12%.Meanwhile,oilspeculatorsnowcontrolover80percentoftheenergyfuturesmarket,afigurethathasmore
than
doubledoverthepastdecade.
As
thecostforAmericanpeopletofilltheirgastankscontinuestoskyrocket,theCFTCcontinuestodragitsfeetonimposingstrictspeculationlimitstoeliminate,prevent,ordiminishexcessiveoilspeculationasrequiredbytheDodd-FrankAct.AlthoughtheCFTChasadoptedinitialpositionlimits,theyarenotstrongenoughandnotyetinforceowing
to
industryopposition,delaysinswapsoversightanddatacollection.Thisissimplyunacceptableandmustchange.Weurgeyoutotakeimmediateactiontoimposestrongandmeaningfulpositionlimits,andtoutilizeallauthoritiesavailabletoyoutomakesurethatthepriceofoilandgasolinereflectsthefundamentalsofsupplyanddemand.Thiscouldentailpromulgationofrulesonlywithregardtothecurrentlyregulatedexchangemarkets.Swapsrulesshouldalso
be
implementedimmediately,butevenso,waitingforswapsrulestotriggerallpositionlimitsissimplynotadequatetoprotectconsumers.Weurgeyoutodevelopalternativemethodsofmovingforwardandtodosoasswiftlyandexpeditiouslyaspossible.WehavearesponsibilitytoensurethatthepriceofoilisnolongerallowedtobedrivenupbythesameWallStreetspeculatorswhocausedthedevastatingrecessionthatworkingfamiliesarenowexperiencing.ThatmeansthattheCFTCmustdowhatthelawmandatesandendexcessiveoilspeculationonceandforall.Thankyouforyourattentiontothisimportantmatter.Welookforwardtoreceivingyourresponse.
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