The Fort Report: Oil Price Speculation

Press Release

The Fort Report

Oil Price Speculation

The North Platte Bulletin ran an informative article on the aspects of oil and gasoline price spikes as they relate to commodities speculation. I thought you might be interested in reviewing this article. You will find it below. Additionally, as a member of the House Agriculture Committee, I participated in a hearing earlier this week on this important issue. If you are interested in viewing parts of the hearing, you may go to my website at http://fortenberry.house.gov/ and select the video clip titled "Energy Hearing."

Airlines keep cutting, call for oil futures regulations
by George Lauby
North Platte Bulletin
6/23/2008

Reps. Jeff Fortenberry and Adrian Smith will participate in a House committee hearing Wednesday examining the energy crisis and futures trading.

Fortenberry said he is looking forward to it.

"Families, communities, and businesses are hurting," he said. "I remain seriously concerned that commodity speculation is a significant factor in the rapid rise of oil prices."

Fortenberry co-sponsored a provision in the Farm Bill that will help regulate the Intercontinental Commodity Exchange and could eventually close the so-called Enron loophole, which critics say allows the energy futures markets to be manipulated by shrewd, wealthy traders.

Fortenberry has also asked the President, the Secretary of Energy, and the House leadership to convene an emergency energy summit to examine the effect commodities speculation has on rising energy costs.

Other hearings

The House subcommittee on oversight and investigations held a lengthy hearing Monday on futures speculation. The U.S. Senate is also preparing to hold similar hearings.

Airlines are among those asking for more futures regulations.

An airline spokesman noted that eight carriers have already shut down and nearly 14,000 airline industry jobs have been cut. In addition, most major airlines are planning to cut flights by 10-12 percent this fall, park airplanes and lay off thousands more workers.

During the House hearing Monday, several lawmakers and witnesses called for more regulation. Many said speculation has added from $30 to $70 to the overall price of a barrel of oil.

Oppenheimer oil analyst Fadel Gheit said oil prices above $65 a barrel are not supported by market fundamentals.

Others urged the government to move cautiously if at all, warning of unintended consequences.

Big trades

Unregulated futures energy trading began with a new federal law in 2000 for which Enron lobbied heavily. That opened the door to what is now heavy trading.

House subcommittee chairman Bart Stupak of Michigan, a strong critic of unregulated futures trading, said traders held 714 crude-oil futures contracts in January 2003 and now have more than 3 million.

Fortenberry, Rep. Adrian Smith and Sen. Ben Nelson are among those calling for extensive changes.

Smith said Nebraska has the potential to produce more hydropower (see 'opinon').

Fortenberry called for Congress and the Administration to fully analyze the effects of commodity speculation and other potential factors, including: rising demand, supply restrictions, inflation, boutique fuels, lack of sustainable alternative sources, geopolitical instability, and OPEC.

Farm bill

Sen. Ben Nelson is calling for a National Commission on Energy Policy and Global Climate Change (see ‘Opinion'). Nelson also said recently that the Farm Bill provision that deals with futures trading "will prove invaluable in the coming months."

The bill provides new regulations for certain over-the-counter energy derivatives (futures) markets. The regulations would apply to electronic trades -- where multiple buyers and sellers are able to post orders and execute transactions over an electronic network.

The Commodity Futures Trading Commission will have more oversight over such trades. The electronic exchanges will be required to publish and/or report information related to prices, trading volume, and the size of positions held by speculators and hedgers.

And, if the CFTC determines these markets play a significant role in setting energy prices, the exchanges will be required to register and comply with core principles aimed at curbing manipulation and excessive speculation, according to the Congressional Research Service.

However, more extensive two-party trades known as "swaps" will apparently continue without oversight unless Congress takes further action.

Sincerely,
Congressman Jeff Fortenberry

Source