WASHINGTON-Senate Democrats are going to press for limits on speculative trading in the energy markets Thursday during a meeting with the chairman of the Commodity Futures Trading Commission.
The meeting will take place as lawmakers have voiced concerns that speculation and illegal trading activities might be behind some of the price increases, building on an Obama administration announcement in April that it would investigate speculation in the oil market.
With a holiday weekend just around the corner, gas prices hover around $4 a gallon, and experts are starting to consider the broader economic consequences of higher fuel prices.
"Many experts believe that up to 40% of the price of oil has to do with excessive speculation," Sen. Bernie Sanders (I., Vt.) said in a statement to Dow Jones Newswires. "The CFTC has been mandated to deal with excessive speculation. I want to know why they haven't done it."
Mr. Sanders is one of the senators expected to attend Thursday's meeting with CFTC Chairman Gary Gensler. Among the others are Sen. Bill Nelson, a Democrat from Florida. Mr. Sanders's comments come as major oil companies face heat from Democratic lawmakers who are targeting repeal of numerous oil tax benefits as part of budget deficit reduction efforts.
The Dodd-Frank financial overhaul bill, passed by Congress in 2010, gave expanded powers to the CFTC to develop a rule that imposed position limits on speculative traders in the energy markets.
In January, the CFTC put forward a proposal for position limits on 28 commodities and received 12,000 comment letters. In a letter to Senate lawmakers Monday, Mr. Gensler said the commission would consider a final rule after reviewing the comments.
Lawmakers have recently stepped up calls for federal regulators to clamp down on speculation and illegal trading activity.
On Wednesday, Sen. Maria Cantwell (D., Wash.) called on the CFTC to use emergency authority to implement the rule on excessive speculation, saying in a speech on the Senate floor that "people who have to commute to work every day, people whose businesses depend on reasonable fuel costs are getting gouged over these prices."
Republicans, meanwhile, have pointed to the Obama administration's energy policies as a cause for higher gasoline prices. Earlier this week, Republicans on the House oversight committee released a report in which they said possible rules for a natural-gas drilling technique known as hydraulic fracturing and the pace of drilling permits in the Gulf of Mexico could slow domestic production and lead to higher gas prices.
On Tuesday, the CFTC charged several oil traders with allegedly manipulating prices in the crude oil market. The CFTC said the companies were involved in a cross-market trading scheme in 2008 that yielded more than $50 million in illegal profits.
CFTC Commissioner Bart Chilton said in an interview with CNBC that "there's more to come" and the commission has "hundreds of investigations" going on. Later, in an interview with Dow Jones, Mr. Chilton said, "I'm not saying there's more cases or not, but we're looking at cases all the time."
Heightened scrutiny over oil prices is shining a spotlight on the differences between speculation and illegal trading activity-as well as government efforts to track both types of activity.
Speculation is legal, whereas manipulation is illegal, Mr. Chilton said.
"Manipulation is something that is very specific in the law and has a really high hurdle for us to prove, so that's why we've only had one successfully prosecuted manipulation case in the 36-year history of the CFTC," Mr. Chilton said, adding that there had been several dozen manipulation cases that have settled over the past decade.
John Damgard, the head of the futures industry's main trade group, praised the agency's work in rooting out people who are manipulating markets Wednesday, but emphasized that speculation is not synonymous with manipulation.
"Markets are very, very complicated mechanisms and no one expects Congress to be experts on how markets work," Mr. Damgard said.
The Justice Department formed a working group in April that is looking to root out several types of illegal trading activity-including price manipulation, fraud and collusion-that could be driving up prices at the pump.
In 2008, the same year oil prices skyrocketed above $140 a barrel, a similar task force organized by the CFTC determined that a preliminary analysis "does not support the proposition that speculative activity has systematically driven changes in oil prices." Instead, the task force concluded that increases in oil prices between 2003 and 2008 were "largely due to fundamental supply and demand factors."