Etheridge energy bill passes house

Washington, D.C. — The U.S. House of Representatives today voted 283-133 to pass legislation introduced by U.S. Rep. Bob Etheridge (D-Lillington) to help ensure that gas prices are not being artificially increased by manipulation and excessive speculation in energy markets.

Experts estimate that between $20 and $60 of the cost of a barrel of oil could be caused by excessive speculation.

“We owe it to the American consumer to ensure that gas prices are reflective of true market value and art not being artificially inflated by investors seeking to make an easy buck,” said Etheridge. “We can’t allow excessive speculation on Wall Street to cause folks to suffer on Main Street.”

The House approved H.R. 6604 The Commodity Markets Transparency and Accountability Act of 2008, bipartisan legislation introduced by House Agriculture Committee Chairman Collin Peterson and Etheridge. The bill is the result of a series of hearings held by the Agriculture Committee earlier in July where expert witnesses testified that at least a part of the spike in energy costs could be caused by excessive speculation in futures trading.

Etheridge is the Chair of the Subcommittee on General Farm Commodities and Risk Management of the House Agriculture Committee, which has jurisdiction over the Commodity Futures Trading Commission, the government agency that is responsible for protecting the public from fraudulent practices in commodity futures trading, including oil and gasoline.

The legislation will give the CFTC additional resources and authority to ensure that manipulation and excessive speculation are not occurring. Specifically it will require the CFTC to hire 100 additional staff people, it will require U.S. regulation for trades made on overseas markets, and it will provide more transparency and disclosure from investors. It will also toughen position limits, which are limits on the number of contracts one can hold on an exchange, and make it more difficult for speculators to receive a hedge exemption from these limits.

The bill must now be approved by the Senate before being sent to the President’s desk. The President has threatened to veto the bill.

Etheridge also voted this month for a separate comprehensive energy bill that will increase American oil production, invest in renewable energy sources and energy efficiency technology, end giveaways to big oil companies, and create jobs here at home.

Fact Sheet
The Commodity Markets Transparency and Accountability Act of 2008

Purpose: To ensure that the recent dramatic spike in energy costs is reflective of the true market forces and is not being artificially caused by market manipulation and excessive speculation.

Problem:

The Commodity Futures Trading Commission is currently severely understaffed. Since 2000, trading on commodity markets has increased six-fold. However, during that time, the Bush Administration let staffing levels at the CFTC fall to their lowest level in the agency’s 33-year history.

Because overseas markets are regulated by foreign entities and not directly by the CFTC, some investors are seeking a less regulated market by trading U.S. energy commodities on the ICE Futures Europe market instead of U.S. markets. Some worry that this could be increasing volatility and raising prices on U.S. markets.

A growing number of hedge funds and other institutional investors have turned their attention and their money to the commodity markets, viewing them as a more lucrative investment than stocks or other securities currently. As a result, questions have been raised about their role in the commodity markets.

Over-the-counter trades, which are made off regulated markets, are not subject to the monitoring and position limits that regulated markets are.

The Commodity Markets Transparency and Accountability Act of 2008:

Requires the CFTC to hire 100 additional full-time staff.

Closes the “London-loophole.” Directs the CFTC to hold overseas markets accountable when U.S. energy commodities are traded on them. Ensures that foreign markets have similar disclosure requirements and position limits and accountability levels — which deter excessive speculation — as domestic markets do.

Provides more transparency by requiring the CFTC to change its reporting of traders in energy markets to more clearly show what position and how much influence investment funds and swap dealers have in energy markets.

Provides transparency in previously unseen over-the-counter markets, which are trades made off exchanges and are not regulated by the CFTC.

Toughens position limits, which are the number of contracts one can hold on an exchange, and creates an advisory board to recommend these limits. Strengthens the hedge exemption, which allows traders to go over the position limit, by ensuring pure speculators cannot receive the exemption.