Lynn Daily Item - Tierney: Curbing Speculation to Lower Gas Prices

Op-Ed

By Representative John Tierney

Paying as much as $60, $70, $80 at the gas pump is too much for our families. With the exception of the 2008 spike in gas prices, we are paying the highest gas prices today than at any time in the past 18 years. And it is not only the price at the pump that is causing an undue burden on Americans. Businesses from dry cleaners to moving companies to grocery stores are passing on their high fuel costs to consumers.

Unfortunately, the majority in Congress seems committed to pursuing the same "drill-only" policies of the past that will not help Massachusetts families or reduce gas prices. Even after the worst oil spill in American history and before remedies for the causes of that disaster have been implemented, there have been three efforts in the last several weeks alone aimed at cutting off environmental reviews for offshore drilling permits and expanding offshore drilling. One effort would even expand offshore drilling to Georges Bank, off the coast of Massachusetts, one of the world's richest fishing grounds.

These proposals ignore three critical facts: 1) According to the Administration, oil companies are not even using 57 percent of land and 70 percent of offshore acres that are already leased to them for drilling; 2) Every million barrels of oil held by Wall Street stock traders, who speculate on the price of oil, contributes to an eight to 10 cent per barrel rise in the oil price; and 3) New supplies take time to enter the market and would have no effect on today's oil prices.

Further, the Obama Administration has already made efforts to expand production in a safe, environmentally conscious way. Domestic oil production in 2010 reached its highest level in seven years, according to U.S. Energy Information Administration statistics. However, even those efforts, combined with a recent increase in production by Saudi Arabia have not reduced the price of gas for consumers.

It should be clear by now that expanding drilling alone will not solve our problems.

What is needed is a concerted effort to curb rampant speculation and anti-consumer practices. With Wall Street stock traders able to buy and sell oil in much the same way that they trade stocks and bonds of companies, the price of oil has become increasingly divorced from the traditional effects of supply and demand. As these traders have become more involved in the oil market by speculating on the future price of oil and driving up the price for consumers, their influence over oil prices has grown to harmful heights. According to one estimate, speculators today control about 70 percent of the open interest in commodity markets. Ten years ago, that number was roughly 30 percent. Unlike trading in stocks and bonds of traditional companies, commodities speculation has a real effect on all Americans, driving up the price of gas and creating undue hardship for those already struggling to make ends meet. This is simply unacceptable.

That is why policies that will end these unfair practices, and keep oil prices at a reasonable level must continue to be supported. I recently called on House Republican leadership to immediately hold hearings to examine the role that speculative oil traders have played in maintaining high gas prices. We need to have an honest conversation about how speculation is lining the pockets of traders and oil company tycoons, while burdening our families. I am also working with colleagues to urge Speaker Boehner to repeal costly and wasteful oil subsidies, and I am helping to push a bill in Congress to do just that, so valuable funding can be targeted to our greatest needs. With the five biggest oil companies making over $32 billion in profits in the first quarter of this year alone -- including $5.5 billion for BP -- taxpayer money need not be used for billions more in subsidies to these same firms.

My efforts in this fight are not new. Under the Democrat-controlled House last year, I helped pass legislation that would combat the market manipulation that inflates oil prices. I also supported efforts that would have made it unlawful, during a declared energy emergency, to sell gasoline at a price that is unconscionably excessive. Unfortunately, the Senate was unable to act on these bills and they did not become law. We need to redouble the effort.

Every time we go to the pump we are reminded that we must get a handle on the rising price of gas. I remain committed to continuing my efforts to convince my colleagues to make real changes and support commonsense solutions that will actually lower prices, not subsidize Big Oil or Wall Street. Our families have waited long enough.

U.S. Rep. John Tierney, D-Massachusetts, represents the 6th District.

This column was originally published in the Lynn Daily Item on May 24, 2011.

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