Statements On Introduced Bills And Joint Resolutions
Floor Speech
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By Mr. SANDERS:
S. 1225. A bill to require the Commodity Futures Trading Commission to take certain actions to prevent the manipulation of energy markets, and for other purposes; to the Committee on Agriculture, Nutrition, and Forestry.
Mr. SANDERS. Madam President, I rise today to introduce the Energy Market Manipulation Prevention Act.
Did you know we are in the midst of the worse economic crisis since the Great Depression? Millions of our fellow Americans are losing their homes, losing their jobs, losing their life savings, losing the ability to send their kids to college and, in many ways, they are losing the hope that their own children will have a brighter future and a better life than they have had. It is a very unusual moment in the history of our country.
In the midst of all of this concern and decline in the standards of living of millions of Americans, the last thing that our country needs right now is to see our people be ripped off at the gas pump this summer because of the speculators on Wall Street. Some of the very same people who caused this recession and have received the largest taxpayer bailout in American history are allowed to jack up oil prices through price manipulation and outright fraud.
This is obviously not only an issue for the moment for millions and millions of people who drive to work every day, but for truckers and farmers and all people who are dependent upon gas; and it is also an issue for many parts of our country, such as Vermont, where a lot of our people heat with oil. We are not going to sit around idly and watch the price of oil artificially rise so that elderly people who heat with oil are unable to adequately heat their homes in the wintertime.
Unfortunately, this artificial increase in oil and gas prices is exactly what is happening now, as it occurred similarly last summer, when the price of oil hit $147 a barrel. The price of gas at the pump was over $4 a gallon, and truckers paid more than $5 a gallon for diesel fuel. That is where we were last summer, and we are heading back there right now, unless Congress moves in an aggressive way to say no to speculation on oil futures.
As you know, the price of oil is supposed to be based on the fundamentals of supply and demand, not by excessive speculation. What all of us learned in economics 101 is that if there is limited supply and a lot of demand, the price of the product goes up. If there is a lot of supply and limited demand, the price goes down. That is one of the basic tenets of free market capitalism.
But interestingly, last month, crude oil inventories in the United States were at their highest level on record, while demand for oil in the United States dropped to its lowest level in more than a decade. In other words, there was a record amount of supply and less demand than we have seen over the last 10 years. Further, the International Energy Agency recently predicted that global demand for oil will drop this year to its lowest level since 1981.
What is going on? Demand is going down, supply is high, and what the fundamentals of economic theory tell us is that gas and oil prices will go down. But as everybody who fills up their gas tank today understands, that is certainly not the case, because gas and oil prices are going up.
Despite the record supply of oil and reduced demand, prices are going up, not down. In fact, the national average price of gasoline has jumped from $1.64 a gallon late last year to over $2.60 today. Crude oil prices recently reached a 7-month high.
The American people have a right to ask why is this happening, in contradiction to the basic economic process of supply and demand, and we have a right and the obligation to act to protect those consumers. The increased prices that millions of motorists are currently seeing have caused severe financial hardship for American families, truckers, small businesses, airlines, and farmers. It is putting enormous strain on an economy already in the throes of a deep recession.
We passed the stimulus package in order to create millions of jobs, in order to put money into the hands of working people, many of whom had lost their jobs. And now what we are seeing, as a result of this artificial increase in the price of gas and oil, is that those tax breaks we gave to working families are going not into the local economy, they are going right back to Wall Street and speculation, and they are going to the oil companies.
All of us have a responsibility to do everything we can to lower oil and gas prices immediately, so that they reflect supply and demand fundamentals, not excessive speculation. Therefore, the legislation I am introducing today will require the Commodities Futures Trading Commission to use its emergency powers to prevent the manipulation of oil prices and empower the CFTC with new authority to prohibit excessive speculation in the oil market.
Last July, the House of Representatives passed similar legislation by a vote of 402 to 19--widely bipartisan. But that legislation, unfortunately, did not become law. In addition, this legislation would also require the CFTC to, No. 1, immediately classify all bank holding companies and hedge funds engaged in energy futures trading as noncommercial participants and subject them to strict position limits.
No. 2, this legislation would eliminate the conflict of interest that arises when a firm, a large Wall Street financial institution, has employees under one umbrella responsible for predicting the future price of oil--the so-called analysts--while the same company controls physical oil assets and trading energy derivatives.
No. 3, this legislation would immediately revoke all staff no-action letters for foreign boards of trade that have established trading terminals in the United States for the purpose of trading U.S. commodities to U.S. investors.
I am delighted that Bart Chilton, one of the commissioners at the U.S. Commodity Futures Trading Commission, has supported this legislation.
Madam President, I ask unanimous consent that his letter to me be printed in the Record.
There being no objection, the material was ordered to be printed in the Record
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Mr. SANDERS. Let me briefly quote from the letter.
He says:
As you know, the Commodity Exchange Act provides the CFTC with broad emergency authority to take action, in its discretion, in order to maintain or restore orderly trading. In your proposed legislation, you have identified critically important areas of concern--excessive speculation in energy commodities, classification of bank holding companies and limits on their energy trading, hedge fund registration, classification and trading limits, conflicts of interest by entities that both trade and advise in the energy arena, and foreign market access. I wholeheartedly agree with you that the time to act on these issues is now, and the CFTC should aggressively utilize all available authorities as appropriate, including but not limited to emergency authority as currently defined in the CEA, to address these pressing issues.
Madam President, I thank the Commissioner for his support of this legislation.
On May 28, I wrote to Gary Gensler, the new Chairman of the CFTC, urging him to undertake many of these initiatives. Last week, in my office, I discussed this issue with Mr. Gensler. He indicated that he has instructed his staff to give him a list of all of the options available to the CFTC to respond to these concerns. While I appreciate Mr. Gensler's efforts on this issue, I hope this legislation will spur the CFTC to take immediate action to lower oil prices.
The bottom line is, right now, at a time when unemployment is soaring, when the middle class is struggling to keep its head above water, the prices at the gas pump are soaring, and we worry about what oil prices in the northern parts of our country will be in the wintertime, there is very strong evidence to suggest that what we are talking about is not supply and demand but excessive speculation on the part of Wall Street in terms of pushing up oil futures.
This Congress must act to protect the middle class and working people of this country, the consumers of this country. It is time for us to demand that the CFTC take the action that is necessary.
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