House Passes Bill Bolstering Oil Trade Regulator
Friday, June 27, 2008
The House of Representatives yesterday approved legislation that directs the regulator overseeing commodity trading to use its emergency authority to investigate and rein in speculators who lawmakers blame for the run-up in oil prices.
The Commodity Futures Trading Commission has not yet taken such action, arguing that oil prices are rising simply because supply cannot keep up with demand. But lawmakers who authored the bill say recent congressional hearings have shown that investors such as hedge funds, pension funds and big financial firms are flooding into commodity trading and causing oil prices to soar.
The measure immediately allows the agency to use its most dramatic powers, such as imposing temporary limits on traders or halting trading altogether when oil prices swing wildly.
The legislation, which passed by a 402 to 19 vote, is a sign of Congress's growing impatience with the CFTC's response to the oil crisis, lawmakers said.
"There are people in our caucus who believe the CFTC is not doing everything it should be doing," Rep. Collin C. Peterson (D-Minn.) who chairs the House Agriculture Committee and sponsored the bill, said in an interview.
Oil is traded on the New York Mercantile Exchange under the CFTC's watch. But contracts are also bought and sold on what lawmakers call "dark markets," such as overseas exchanges and in private deals, which are beyond the CFTC's jurisdiction and can be difficult to oversee. The agency has granted exemptions that allow big financial firms to trade oil contracts in excess of regulatory limits. The legislation aims to make it easier for the CFTC to use its emergency powers to track activity on these markets.
The CFTC announced that it formed a task force to examine whether speculators are unduly affecting the oil markets. Walter Lukken, the agency's chairman, has said that its report would be ready Sept. 15.
Peterson wants the work done sooner. He added that although his committee had generally been supportive of the CFTC, there was "impatience" and "a fair amount of a lack of confidence in certain segments of the Congress with the CFTC."
The bill, which needs approval by the Senate, is not specific on how the CFTC should use its emergency powers. It is also unclear how the CFTC would comply with the bill if the agency didn't think oil prices were being caused by speculation.
Rep. Chris Van Hollen, (D-Md.), a co-sponsor of the legislation, described it as a way to give the CFTC a push.
"The fact that the CFTC has refused to recognize that there is any speculative component at all to the rise in oil prices despite what we believe is overwhelming testimony to the contrary indicates that they need this push," Van Hollen said in an interview. "They are out of touch with the economic pain that the American people are feeling. We don't see them addressing this issue with the urgency that's required."
Two representatives for the CFTC declined to answer questions or make Lukken available for an interview.
In a statement, the agency said: "The CFTC is implementing a number of initiatives to further enhance market oversight and transparency in the energy futures markets and recently disclosed its ongoing nationwide crude oil investigation. It is imperative that the futures markets are working properly for all Americans and we continue to rigorously act toward that end."