FOR IMMEDIATE RLEASE
Thursday September 28, 2006
Mark Cooper, CFA, 301-807-1623
Ann Wright, CU, 202-462-6262
Costs Consumers Billions
(Washington, DC) – Consumer groups called on Congress today to enact legislation to restore order to energy futures markets in the wake of growing evidence of a speculative bubble and market manipulation that cost energy consumers billions of dollars in the past few years. Consumers Union and the Consumer Federation of America strongly support Senator Diane Feinstein’s amendment to S. 1566, the Commodity Exchange Reauthorization Act, as must pass legislation in the effort to address price volatility in today’s energy markets.
“The Commodity Futures Trading Commission currently has no authority to oversee the trading of energy futures on over-the-counter exchanges, a large and growing market,” said Ann Wright, Senior Policy Analyst for Consumers Union. “Congress has failed to bring transparency and surveillance to the trading of energy commodities – something critical to the integrity of our price discovery markets,” she added.
The Feinstein proposal, which was introduced as S. 2642, the Oil and Gas Traders Oversight Act of 2006, would grant the Commodity Futures Trading Commission (CFTC) oversight authority over unregulated futures markets by requiring U.S. energy traders to keep records and report large trades to the CFTC.
A 2006 report – “The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat” – released by Senator Coleman and Levin, Chairman and Ranking Member of the Senate Permanent Subcommittee on Investigations, concluded that the billions of dollars pouring into energy commodities through electronic trading of energy futures, including gasoline, crude oil and natural gas, could have a significant impact on the rise in energy prices. This report reaches conclusions similar to two reports commissioned by Attorneys General from Illinois, Iowa, Missouri and Wisconsin, which reviewed the natural gas and oil industries (“The Role of Supply, Demand and Financial Markets in the Natural Gas Price Spiral.”)
“The reports make clear that there is substantial evidence that the large and growing amount of speculation in the current market has had a significant impact on prices,” said Mark Cooper, Research Director for Consumer Federation of America. “Large quantities of speculative buying or selling of futures contracts can distort market signals that in theory are indicators of true supply and demand,” he added.
“While gas prices at the pump are down, they are guaranteed to rise again. Congress must begin to address root problems behind price spikes—such as the unchecked electronic trading of oil futures contracts. Without Congressional action, consumers will continue to see big price swings at the pump,” said Wright.