Federal regulators should adopt a rule with real teeth to limit oil speculators, not a watered-down measure set for a vote on Tuesday, Sen. Bernie Sanders said. The Commodity Futures Trading Commission is slated to consider a rule that Sanders said "will do little or nothing" to limit traders who artificially drive up gasoline and home heating oil prices. "At a time when the American people are experiencing extremely high oil and gas prices, this would be simply unacceptable," Sanders wrote in a letter to Chairman Gary Gensler.
Sanders said the weak proposal before the commission falls short of what Congress intended in last year's Wall Street reform law. The Dodd-Frank Act required the commission to finalize rules on speculators by last Jan. 17. "If the CFTC had done its job and obeyed the law, consumers would have received real relief at the gas pump during the past nine months, particularly during the summer driving season. Unfortunately, this did not happen."
The commission still could act in time to substantially lower heating oil prices this winter. "This is more important now than ever," Sanders said. He cited new projections by the Energy Information Administration that heating oil prices in the Northeast will set a new record this winter and climb to more than $3.70 a gallon. Vermonters could pay up to $4 a gallon for heating oil this winter, he added. "If these projections are accurate, it will be harder than ever for Vermonters and nearly 7 million other Americans who heat their homes with fuel oil to stay warm this winter. We need the CFTC to be vigilant and make sure that this does not happen," Sanders said.
Sanders also cited mounting evidence that speculators - not supply and demand - have driven up prices. The latest study on the role of speculators came in a new report by Better Markets, a group favoring limits on speculative trading. The study looked at 25 years of index funds tied to the value of oil, wheat and other commodity contracts. It found a clear link between an uptick in futures market prices as contracts expire and roll into new deals.
"The bottom line is that we have a responsibility to ensure that the price of oil is no longer allowed to be driven up by the same Wall Street speculators who caused the devastating recession that working families are now experiencing," Sanders said. "That means that the CFTC must finally do what the law mandates and end excessive oil speculation once and for all."
To read the letter, click here.