SHAHEEN MOVES TO PROTECT CONSUMERS FROM SPIKE IN GAS PRICES

(Washington, D.C.) – With gas and home heating oil prices spiking, U.S. Senator Jeanne Shaheen (D-N.H.) today raised concerns about the possible role of Wall Street oil speculation and whether government regulators have the tools they need to combat it. Shaheen’s letter to the chairman of the Commodity Futures Trading Commission (CFTC) asks for an assessment of speculation’s role in the price spikes and the potential effects of proposed cuts to the agency in the House Republican spending bill. 

“Rising oil prices pose a potentially serious threat to our still fragile economic recovery, and we must remain vigilant to ensure that speculation on Wall Street does not hurt American families and businesses,” Shaheen said.  “We need to make sure the agency charged with reining in excessive energy speculation has the resources it needs to monitor massive, complex markets and to protect consumers.”

With oil prices at their highest since just before the financial crisis began in 2008, at more than $100 per barrel, concern about rising energy costs is growing across the country.  At the same time, speculation on oil has increased dramatically in recent months—the largest trading firms now have nearly twice as many long contracts open on oil as they did in 2008, when the price of oil peaked at $147 per barrel.

Despite the potential for disruptive speculation, the House Republican spending bill would cut the CFTC’s budget by one third.

In January, Shaheen sent a letter to the CFTC asking the agency to move quickly to establish hard limits on speculation in energy commodities, as required by the 2010 Wall Street Reform bill. That rulemaking is ongoing.

The full text of the Senator’s letter is below and attached.

March 10, 2011

The Honorable Gary Gensler
Chairman
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW, Room 9060
Washington, DC 20581-0001

Dear Chairman Gensler:

Consumers in my home state of New Hampshire and across the country have become concerned about the rising price of oil. Rising oil prices threaten not only the bottom lines of American businesses and families, but also our fragile economic recovery.

I appreciate the role that the Commodity Futures Trading Commission (CFTC) plays in ensuring properly functioning futures markets and protecting the public from excessive speculation. The need for a strong CFTC has been underscored by recent reports showing that speculative positions for oil have increased. I am concerned that this increase in speculation may have an impact on the price that consumers must pay for everyday needs, like gas for their cars and oil to heat their homes.

I know that to fulfill its responsibilities, the CFTC needs resources to monitor huge and complex markets. As you are aware, the FY11 Continuing Resolution proposed by House Republicans (H.R. 1) would cut the CFTC’s budget by one third. I would appreciate it if you could provide me with your assessment of the impact of these cuts on the CFTC’s ability to gather information about speculation and to take appropriate action to protect American consumers.

As you know, the price of oil recently went above $100 per barrel. The last time oil was that expensive was 2008, just before the financial crisis. The largest trading firms now have nearly twice as many long contracts open on oil as they did in 2008, when the price of oil hit its peak price of $147 per barrel. Some observers have called this a “speculative fervor,” and it is a troubling sign for the economy.

With rising oil prices on the minds of many Americans, it is essential that regulators and policymakers have the right information about these positions to determine whether action is necessary. I would appreciate hearing your thoughts and being provided with information about current speculative positions and their potential impact on prices.

I also want to thank you for your leadership thus far in moving forward with rules establishing speculation limits as required by the Wall Street reform bill. In the absence of those rules, I appreciate your willingness to act using existing authorities, when appropriate, to protect American consumers.

I look forward to working with you further on these issues.

Sincerely,

Jeanne Shaheen
United States Senator