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Ms. CANTWELL. Mr. President, I thank the Senator from Oregon for his stalwart attention to energy markets and to the concern that many west coast residents have over high energy costs. Senator Wyden has long been a vocal critic of what's happened in some electricity markets, and trying to figure out what has happened with the oil markets and why the west coast pays higher gas prices than any place in the country. We still wanted to know why. People say we were an isolated market, and that is why we were paying the highest gas prices. Then Hurricane Katrina hit and our prices still went up, even though we were supposedly an isolated market.
So Senator Wyden has long been a person coming to the Senate, fighting for the consumer, saying we should not be gouged by higher prices on energy.
Energy is the lifeblood of any economy. We know what manipulation looks like in the Northwest because we saw it with Enron. When our electricity markets were manipulated, everybody said it was the environmentalists not allowing us to construct new generating facilities. Well, when we finally exposed the audiotapes, we realized that it was just pure market manipulation. In fact, what we found out is that people were taking the futures market and basically making plays in the futures market while they also had the ability to affect the physical supply market and spot prices for electricity. So by combining those schemes with different things such as ``Get Shorty'' and ``Fat Boy'' and all of these names they came up with, Enron was able to convince utilities and various customers that the supply was tight and that they were going to have to pay more for electricity in the future and consequently they ought to keep paying these high prices. Well, thanks to a lot of hard work by a lot of individuals and ultimately the Department of Justice, the Enron schemes were called for what they were--just out-and-out market manipulation.
My colleague, Senator Wyden and I, screamed loudly about that situation and said we wished the Federal Energy Regulatory Commission would have acted a lot sooner on that issue, and if they would have acted sooner, we would have saved a lot of jobs in the Northwest. We would have saved a lot of industries. A lot of people lost their jobs, their retirement, their homes over those high electricity prices.
Thank God the result was such that we were able to pass new legislation in 2005, making it a Federal crime for anybody to manipulate natural gas or oil markets. I should say FERC has used that authority over the last several years to recoup millions of dollars from violations by industry officials who continued to perpetrate the same kind of scheme of going into the futures market and holding positions in the futures market and then taking physical supply and being able to affect the physical supply and demand.
So this is something that is amazing to us from the west coast. I know my colleagues, including Senator Feinstein, Senator Boxer, Senator Murray, and I have all been on the same page. Senator Merkley has been a loud voice on this issue. We have been through this nightmare. That is why I have to say first and foremost that we find it appalling that someone would propose H.R. 1, or the Ryan budget, that would take away policing ability from the Commodity Futures Trading Commission on the type of activity that would allow them to properly regulate these markets.
We saw what happened. What we are so appalled about is it seems as though it is now happening again in the oil markets. In fact, we see today on the front page of the New York Times ``U.S. Suit Sees Manipulation of Oil Trades.'' So the commodities commission is finally saying now: Yes, we are looking at this case. And it should be no surprise what they actually see because it is the same shenanigans that happened in electricity, the same shenanigans that happened in natural gas, and, yes, the same shenanigans are happening in the oil markets.
That is the commodity agency that says in this case there was a close relationship between the physical oil price and the price of the financial futures which moved in parallel. So basically what happened is that in the oil futures market, these individual companies and traders took large positions. In fact, their positions were so big--and that is what Senator Wyden has just described. If this agency would come in and set position limits, people wouldn't be able to come in and move the market in such a significant way. But at the same time, it is alleged that these companies actually had millions of barrels of physical crude oil and they actually had no commercial use for the oil. So here we have people buying the physical supply--again, to manipulate and help tie it into the futures market--when they don't have any commercial need for it. That is why it is so important to have the CFTC do its job and to interpret who are legitimate hedgers, such as airlines, farmers, people who actually need the physical supply, juxtaposed to these large institutions that are just coming in and moving the market.
So what is amazing is that at one point in time, what they had as far as physical supply--for somebody who didn't even have a commercial use, at least according to this New York Times article--was two-thirds of the excess barrels available at Cushing. So here is somebody who had the physical supply and was controlling two-thirds of marginal oil supply and then controlling the futures market. So they were basically making money on the upside and they were making money on the downside. That is what the CFTC is alleging in its case. I think it is one of the first cases in which a small group of traders are being charged in the potential role of manipulation of gas prices.
I don't have to tell the Presiding Officer how critically important this is. I have been home recently and paid $4 a gallon for gasoline. Many people are starting what is soon going to be the summer driving season, and they are outraged at the price of gasoline. It is hurting our economy. People who have to commute to work every day, people whose businesses depend on reasonable fuel costs are getting gouged with these prices, and we have Federal regulators who need to be more aggressive at investigating these cases.
I will say I am very happy the Obama administration and the Department of Justice appointed a task force. That is exactly what we need. We need every Federal agency that has oversight of these markets, whether it is the physical market with the FTC or the CFTC and the commodities market, to work together with the Department of Justice to make sure these schemes are not continued to be perpetrated on the American public.
Our economy is too important to have this kind of activity continue to wreak the kind of havoc it has on our system. When we think about it, it is not as if we don't know what the scheme is. We have seen it time and time again with these other energy markets. So the question is whether we are going to be aggressive and make sure the CFTC has the tools it needs, which means not cutting its funding as the Ryan budget or H.R. 1 wants to do, and that it actually takes seriously its role and responsibility and starts setting position limits, starts the day-to-day activity, because the value Senator Wyden and I are down here talking about, instead of this case that now is going to be investigated--how many days, months, and years did we live with the potential of higher fuel costs?
If this case is correct, how many days did we live with the higher cost, and how long will the investigation take, versus if the CFTC was actually implementing the law and the rules we gave them and enforcing position limits? It would be policing the market on a day-to-day basis and preventing consumers from paying one dime or one penny more than they needed to pay for high fuel costs.
It used to be that these oil markets were for legitimate hedgers.
My colleague and I represent a very robust agricultural community. We grow lots of different products in the Northwest, probably over 200 different agricultural products. We depend on the commodities markets to hedge for the future. But that market was created, after the Dust Bowl devastated so many farmers, to give them a chance to legitimately hedge. Now, all of a sudden, it has been captured by these large financial institution players. It used to be that those who really needed to hedge, such as farmers and airlines, controlled 70 percent of the market. Now they are only 30 percent of the market. Seventy percent of the market is these large players, just as was described in this article--people who are out there basically using their financial weight to move the market in a direction that then they can sell on the futures market and benefit from it. It is outrageous. It is outrageous that our economy has to put up with this, that individuals have to put up with this.
I know my colleague from Oregon and I are going to be out here, and we are going to be loud and consistent until we have the rules and regulations in place to make sure these markets are properly policed. We don't have to wait another day. We don't have to wait 1 more day. The commodities commission could be doing this job. They don't need another legislative bill from us. They don't need another vote from anybody on the commission. They can use their emergency authority. They can implement these rules today and help consumers save on high fuel prices.
So I hope my colleagues will help us in this effort to bring up the issues and make sure the American public understands what is going on so we can bring the pressure to bear on getting proper regulation in place.
I thank the Chair.
Mr. WYDEN. Would my colleague yield for a question?
Ms. CANTWELL. Yes.
Mr. WYDEN. My colleague has made a very eloquent case with respect to how this hammers the people who need oil on a daily basis--farmers and truckers and restaurants. The Senator from Washington juxtaposed their position compared to the speculators. Those people have a lot higher tax rate, for example, than do the speculators. So there is one advantage after another that the speculators have over the people about whom my colleague and I are concerned.
Is it the understanding of my colleague that the next best step to help those people and small businesses who need oil on a daily basis is to get the CFTC out of the regulatory swamp and to enact these position limits?
Ms. CANTWELL. Well, when we are paying $4 a gallon for gasoline, we are affecting and impacting everybody who moves a product for business or anybody who commutes to work for any kind of distance. I know my colleague has probably heard, as I have, from a lot of small businesses that when fuel costs become the second largest expense, it is hard for them to continue to do business.
So my colleague is right. The CFTC could basically address this by just implementing the authority we gave them under the financial regulatory reform legislation we passed. That is all they have to do. Now, I would say to them that they already have the emergency authority. They have so many tools at their disposal.
I am glad they are investigating this case. I think this case is illuminating of the type of scheme that might include the details which are so familiar to my colleague and me of prior schemes and how people work them. But I would say that an investigation of these schemes is only going to go so far in helping the American consumer. If they take another 6 to 8 months to investigate these schemes, a lot of people are going to lose their jobs. So why not implement the rules they have right now, put them in place so we can protect consumers, and certainly don't pass legislation here in the Senate or in the House that is going to take away the ability to stop the kinds of activities that drive up higher gas prices by manipulation.
We want enforcement, we want it now, we want protection of consumers, and we will continue to be vocal about this issue. I thank my colleague from Oregon for joining me today to talk about this issue.
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