Washington, D.C. – U.S. Senator Amy Klobuchar and four other Senators today introduced legislation directing the Commodity Futures Trading Commission (CFTC) to use its emergency powers to stop excessive Wall Street oil speculation that is hurting consumers at the pump and increasing costs for farmers and businesses. During a meeting with CFTC Chairman Gary Gensler last week, Klobuchar pressed the agency to use its emergency authority to help reign in oil speculators, but the CFTC has failed to act. A recent report shows that oil speculation raises gas prices an average 56 cents per gallon.
“Out-of-control speculation on Wall Street is driving up gas prices, hurting consumers and increasing costs for farmers and businesses,” Klobuchar said.“The CFTC has the power to stop this excessive speculation, but has been dragging its feet. This legislation would direct the CFTC to take immediate action to reduce unnecessary speculation and give families some relief at the pump.”
Oil speculators now control over 85 percent of the energy futures market, a figure that has more than doubled over the past decade. Studies have shown that excessive trading in oil futures is causing price volatility unrelated to supply-and-demand fundamentals and contributing to high gas prices that are hurting consumers at the pump.
The Dodd-Frank Wall Street reform bill required that the CFTC impose position limits to eliminate, prevent, or diminish excessive oil speculation by January 17, 2011. The CFTC failed to meet this deadline and has yet to implement position limits.
The senators’ legislation directs the CFTC to utilize all its authority, including its emergency powers, to eliminate excessive oil speculation. The provision requires the CFTC to invoke its emergency powers within 14 days to eliminate excessive speculation, price distortion, sudden or unreasonable fluctuations or unwarranted changes in prices, or other unlawful activity that is causing major market disturbances that prevent the market from accurately reflecting the forces of supply and demand for energy commodities in any contract market within the jurisdiction and control of the CFTC. The senators offered an identical bill as an amendment to legislation currently being debated on the Senate floor.
Klobuchar has also cosponsored legislation, the Anti-Excessive Speculation Act, that would drain excessive speculation from the energy markets through three major steps. First, it would, for the first time, define what constitutes excessive speculation. The lack of a clear definition of excessive speculation is a major reason why past regulatory and legislative efforts have failed. Second, the bill would establish clear, precise statutory position limits on individual speculators. No single trader could hold more than 5 percent of the oil market for speculative purposes. Third, it would cap energy speculation as a percentage of the overall market. The cap would be set at its 25-year historic average.
Klobuchar serves on the Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission.