1.
(a)This Act may be cited
as the Lowering Oil Price Speculation
for Infrastructure Dedicated to Economic Development Act of
2009
or the LOPSIDED Oil Prices Act of
2009
.
(b)Congress
finds the following:
(1)The price of oil has risen and fallen
dramatically over the last decade without a clear connection to the laws of
supply and demand.
(2)The price of a
barrel of oil predictably stayed beneath $20 a barrel of oil for decades. In
the beginning of 1999, the price was under $10 a barrel of oil, but since then
the oil market has been plagued by speculation and fluctuated wildly.
(3)In late 2004, the
price of oil exceeded $40 a barrel of oil, up 400 percent in 5 years.
(4)In late 2007, the
price exceeded $80 a barrel of oil, up 800 percent in 8 years.
(5)Nine months later,
the price of oil peaked at $145 per barrel of oil, up 1450 percent in just
under 10 years. While demand has risen, it has not to risen at those
rates.
(6)The price of oil
collapsed in 2008, but the collapse preceded the greater economic downturn. In
January 2009, the price had dropped to just over $30 a barrel of oil.
(7)The economy
continues to slide downward pushing with it oil demand, but illogically the
price of oil recently peaked at over $70 a barrel of oil.
(8)Many economists
have attributed this irrational behavior of the oil market to the large
increase in speculative trading in oil derivatives. Crude oil is now the
world’s most actively traded commodity futures contract.
(9)In 2004, the New
York Mercantile Exchange (NYMEX) facilitated 52 million oil futures contracts,
and in 2008 NYMEX facilitated 134 million oil futures contracts. Other
exchanges have seen similar increases, and there is no accurate measure for
over-the-counter trades.
(10)On June 13, 2009,
the finance ministers from G8 countries—Canada, France, Germany, Italy, Japan,
Russia, Britain and the United States—said “Excess volatility of commodity
prices poses risks to growth.”
(11)Commodity Futures
Trading Commissioner Bart Chilton, said in June 2009, “Crude oil prices are up
60 percent on the year. Supplies are at a 10-year high, and demand is at a
10-year low. You do the math. Why should prices be over $70?”
(12)Many economists
argue that a transaction tax on speculative trading will deter short-term
speculation, which will reduce the volatility and price of oil.
(13)James Tobin, a
Nobel Prize winner in economics, stated a security transaction tax “would
automatically penalize short-horizon round trips, while negligibly affecting
the incentives for . . . longer-term capital investments.”
(14)Larry Summers,
the current Chairman of the National Economic Council and the top economic
adviser President Obama, wrote in 1989 that imposing a securities transaction
tax “would have the beneficial effects of curbing instability introduced by
speculation, reducing the diversion of resources into the financial sector of
the economy, and lengthening the horizon of corporate managers. The efficiency
benefits derived from curbing speculation are likely to exceed any costs or
reduced liquidity or increased costs of capital that come from taxing financial
transactions more heavily.”
(15)A well-designed
oil transaction tax could reduce the volatility of the oil futures market
without harming legitimate hedge traders. Oil prices will then return to
accurate price discovery following the supply and demand price curve.
(16)Since 70 percent
of oil consumed in the United States is for transportation, the revenue raised
on oil transactions is an ideal additional source of funds for the Highway
Trust Fund.
2.Tax on
transactions in oil futures and options
(a)Chapter 36 of the
Internal Revenue Code of 1986 is amended by inserting after subchapter B the
following new subchapter:
CTax on
transactions in oil futures and options
Sec. 4475. Tax on transactions in oil futures and
options.
4475.Tax on
transactions in oil futures and options
(a)
(1)There
is hereby imposed a tax on each covered transaction in an oil futures contract
of 0.2 percent of the value of the futures instruments involved in such
transaction.
(2)There is hereby imposed a tax on each
covered transaction in an oil option of 0.5 percent of the premium paid on the
option for a futures instruments involved in such transaction.
(b)
(1)The tax imposed by this section shall be paid by—
(A)the trading facility on which the
transaction occurs, or
(B)if such transaction does not occur on a
trading facility, by the buyer of the transaction.
(2)Withholding if
buyer not united states personSee section 1447 for withholding by seller
if buyer is foreign person.
(c)Exception for
commercial tradersThe tax
imposed by this section shall not apply to any transaction if—
(1)either party to
the transaction is—
(A)classified by the
Commodity Futures Trading Commission as a commercial trader with respect to
oil, or
(B)a financial institution acting on behalf of
such a party (but only if the financial institution does not at any time
acquire ownership of the security), and
(2)the transaction is
a bona fide hedging transactions (within the meaning of section 4a(c) of the
Commodity Exchange Act).
(d)For purposes of this section—
(1)The term covered transaction any purchase or
sale of an oil futures contract or an oil option if—
(A)such purchase or
sale on a trading facility located in the United States, or
(B)the purchaser or
seller is a United States person.
(2)The term oil futures contract
means any contract of sale of oil for future delivery (within the meaning of
the Commodity Exchange Act).
(3)The term oil option means any
option on a oil futures transaction.
(4)The term trading facility has the meaning
given to such term by the Commodity Exchange Act.
(e)The
Secretary shall carry out this section in consultation with the Commodity
Futures Trading
Commission.
.
(b)Subchapter
A of chapter 3 of such Code is amended by adding at the end the following new
section:
1447.Withholding of
tax on transactions in oil futures and optionsIn the case of any acquisition of an oil
futures contract or an oil option (as such terms are defined in section 4475)
by a foreign person, the transferor shall be required to deduct and withhold a
tax equal to the tax which would be imposed on such acquisition under section
4475 if the transferee were a United States
person.
.
(c)Tax revenues
deposited into highway trust fundParagraph (1) of section
9503(b) of such Code is amended by striking and
at the end of
subparagraph (D), by striking the period at the end of subparagraph (E) and
inserting , and
, and by inserting after subparagraph (E) the
following new subparagraph:
(F)sections 1447 and 4475 (relating to taxes
on transactions in oil futures and
options).
.
(d)
(1)The table of
subchapters for chapter 36 of such Code is amended by inserting after the item
relating to subchapter B the following new item:
Subchapter C. Tax on transactions in oil futures and
options.
.
(2)The table of
sections for subchapter A of chapter 3 of such Code is amended by adding at the
end the following new item:
Sec. 1447. Withholding of tax on
transactions in oil futures and options.
.
(e)The amendments made by this section shall apply to
transactions occurring on or after October 1, 2009.