Matheson Calls for Level Playing Field Across Oil Trading Markets
Passage Could Help Lower Gas Prices
Congressman Jim Matheson today told members of a House Committee why his legislation to curb the role of excessive speculation in the oil futures trading market could potentially lower gasoline prices. Matheson addressed the House Agriculture Committee about HR 6284 - the Close the London Loophole Actduring a hearing on amending the Commodity Exchange Act.
"I share the suspicion that something other than the normal law of supply and demand is behind the record run up in oil prices. I think there are actions that we can take to ensure a level playing field so that no one is unfairly gaming the system' on oil trading exchanges," said Matheson.
Matheson testified that as a former energy company businessman, he helped large consumers of energy implement strategies to hedge against price risks.
"Futures markets work because they allow investors to assess risk, to hedge and protect against losses, and to secure gains through speculation. There is a legitimate role for speculation, particularly in the futures market, that just isn't well understood. That's because the futures markets works best when liquidity exists to stabilize prices," Matheson testified.
Matheson called for action that would provide transparency and accountability without disrupting the legitimate function of the markets. His bill provides full enforcement authority over traders within the U.S. who trade on an exchange located outside the U.S. It also requires the Commodity Futures Trading Commission (CFTC) to set up agreements with foreign exchanges regarding comparable speculative limits and reporting requirements before a foreign exchange can establish direct trading terminals in this country.
"The problem before us today is not black and white. It exists in shades of grey. That's why we need to be looking for solutions that force all the players to play by the same rules. That does not happen today," Matheson testified.
Matheson said he'll work in a bipartisan way to move legislation that solves the problem without hampering the market role vital to the health of the economy.