By Bruce Edwards
Vermont's congressional delegation is applauding the Commodity Futures Trading Commission for announcing a series of hearings on whether limits should be placed on speculators who are accused of artificially driving up energy prices. Commodity Futures Trading Commission Chairman Gary Gensler announced Tuesday that public hearings will include a "careful review of the appropriateness of exemptions from these limits for various types of market participants."
The CFTC places limits on the trading of certain agriculture products, but not energy products.
"My firm belief is that we must aggressively use all existing authorities to ensure market integrity," Gensler said in a statement.
Sen. Bernard Sanders, I-Vt., and Rep. Peter Welch, D-Vt., have been vocal critics of hedge funds and investment banks, accusing both of driving up the price of heating oil, gasoline and other energy products.
Sanders said Tuesday that Gensler's announcement is welcome news and a step forward in curtailing the impact of speculators.
According to Sanders, the supply of oil in the United States is at its highest level since 1990 while demand is lower than it was in 1992.
"What that means is when you have a lot of supply and you have a decline in demand, prices are supposed to go down," Sanders said, "and yet … since December, crude oil prices have nearly doubled and gasoline prices have risen almost a dollar a gallon."
He said that tells him speculation in the energy markets is having a significant upward impact on prices.
Welch said greater regulation by the CFTC is needed to turn an upside-down market right side up by taking the speculation premium that benefits hedge funds and banks out of the price equation.
He said the futures market has two functions, one of which is legitimate while the other is highly questionable. "The legitimate (function) is to help airlines, fuel dealers, home owners get some price certainty," Welch said. "These are businesses that require the use of oil and the futures market is very important to them."
The other function that offers hedge funds and other speculators a "casino-like opportunity" is very questionable, he said. Welch said it may mean barring speculators from the commodities futures market but at the very least they need to be tightly regulated.
Welch said Gensler, the commission's new chairman, is serious about reigning in speculators and that Gensler "is on the side of the consumer."
Gensler also announced Tuesday steps to ensure greater transparency of trading data on the futures market.
Sen. Patrick Leahy, D-Vt., said action by the CFTC is in stark contract to Bush administration policy.
"During the previous administration the CFTC resisted closer examination of the spike in oil prices," Leahy said in an e-mail statement.
"This new effort to shine a light on the murky world of high-stakes oil speculation is a welcome change. Greater transparency can help inform the marketplace, signal problems at an earlier stage, and curb abuses."