[Congressional Record Volume 154, Number 71 (Thursday, May 1, 2008)]
[Senate]
[Pages S3731-S3733]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                 ENERGY

  Ms. CANTWELL. Mr. President, there are many items we were taking care 
of, but I think the Senate, including the Presiding Officer, in the 
last several days has spent a lot of time talking about the high prices 
of gasoline and how the consumers are being impacted by it.
  I come to the floor tonight to continue that discussion and to say to 
the American people and the people of Washington State whom I represent 
that we are going to be aggressive and vigilant about looking into the 
oil market and why gas prices have risen over 100 percent in a year 
when there has been no disruption of supply, when there has been no 
shortage, when most oil companies testified that oil should be at $60 a 
barrel, why we are at these high gas prices.
  Many of my colleagues have been out on the floor speaking. I keep 
pointing to the fact that the price of oil has been at over $118 a 
barrel. I don't know what they closed at today. Many consumers have 
been paying anywhere from $3.56 a gallon to $4.22 a gallon for diesel. 
Oil futures--I keep emphasizing this--oil futures are part of what 
drives the day-to-day price of oil. When oil futures are so high, that 
helps set the price in the day-to-day, what is called the spot market. 
We know oil futures now will be over $100 a barrel for several years. 
We know this is a very big indicator of the challenge we face in 
keeping gasoline prices low.
  Many of my colleagues have been out here talking about ANWR, how we 
should drill in the Arctic Wildlife Refuge and we will solve our 
problems. I do not support drilling in the wildlife refuge because I 
think it is a very special place because it is a wildlife refuge. More 
importantly, in this case, it is not going to solve our energy crisis. 
Drilling in the Arctic Wildlife Refuge will, at the height of its 
production 10 or 20 years from now, if it actually occurs, will reduce 
gas prices by about a penny a gallon. We are talking about a few 
dollars of savings over a year's period of time. We are not talking 
about a solution.
  The United States has 3 percent of the world's oil reserves. We are 
not going to drill our way out of this problem. So we need to act.
  Many of my colleagues have said it is about the fact that there is 
not enough gas supply; we don't have enough inventory. And we hear from 
oil analysts who give testimony or write articles in the paper that 
``gasoline inventories are higher than the historical average at this 
time of year . . . so there is really no need to worry about the supply 
being too tight.'' This is an oil analyst who said this in March. Here 
is somebody analyzing the market who says it is not about the supply 
being too tight.
  We had some people say it is all about refineries, if we just went 
ahead with refineries producing more and there are all these 
environmental regulations and they cannot produce more oil. According 
to CEOs of oil companies, that is not the issue because the CEO of 
Shell testified that--this is before a Senate committee--``We are not 
aware of any environmental regulations that have prevented us from 
expanding refinery capacity or siting a new refinery.'' That is not 
what the problem is either.
  We know it is not any existing regulations because here is another 
CEO of an oil company who said: At this time, we are not aware any 
projects have been directly prevented as a result of any specific 
Federal or State regulation.
  I have gone over some of these charts, and I am going over them again 
tonight because I think it is important for us to get to the bottom of 
what is going on. We owe it to our consumers, to our constituents to 
make sure that strong Federal statutes are in place that prohibit 
market manipulation and that they are enforced and that if markets are 
out of control--and by that I mean there is no justification for the 
price--we have somebody in the Federal Government, a Federal agency 
that is going to police that market and hold people accountable for the 
manipulation of supply and price.
  During the summer season, we actually think consumption in the United 
States is projected to decline. So this notion somehow that the summer 
driving season is upon us and all of a sudden the price should go up 
because more people are going to be driving taking vacations and it is 
going to have an impact and that is why the price should go up is just 
not correct. This is a statement by the Energy Information Agency that 
it declined over last year by three-tenths of a percent and is expected 
to decline by four-tenths of a percent for the summer. It is not really 
about the fact that all of a sudden just because it is summer we should 
pay higher gas prices.
  I have shown this chart about supply and demand because it shows in 
the orange color what demand have been and what supply has been, the 
yellow line. What is interesting is that supply and demand has been 
fairly consistent over time; that is, we see some anomalies there, but 
pretty much supply and demand are being met. So someone cannot say we 
had in 2007 or 2008 a big gap and that is why today prices are 100 
times what they were, over 100 percent from where they were a year ago. 
You cannot say that because supply and demand are basically constant.
  That leaves us to say, What is the problem? What is going on and what 
is causing this problem? When I think about this issue about what 
America needs to do to make sure oil markets are policed, to make sure 
oil markets are functioning, to make sure oil, a commodity that is so 
important to us in the United States as it relates to our economy, is 
really properly policed by proper Federal agencies, I look at where 
this is.
  I have said a couple times on the floor now it seems to me that 
hamburger in America has more regulation as it relates to the futures 
market than oil does. I am sure some will say: What is the Senator from 
Washington talking about? What I am talking about is basically this 
chart which is that cattle futures, which are traded on several 
platforms, basically do not have any exemptions. They have to comply 
with all the rules and regulations of the futures market. That means 
they have to register, people have to know who is buying and selling on 
that market. They have daily reporting requirements. That means there 
has to be transparency. And there are speculative limits. Those 
speculative limits in the market for something such as cattle futures 
basically say if price gets out of control, then they stop the market. 
They stop the market; they don't let it just careen out of control.
  Yet we look at oil--besides the NYMEX, oil has been traded on these 
mini-platforms, and you ask: Does it have to meet any of these same 
requirements as beef? No. Look over here and they are exempt. There is 
no check mark here. They are exempt. They are an exempt commodity. Why? 
Because in 2000, they were given an exemption called the Enron loophole 
that basically said those trades don't have to

[[Page S3732]]

comply with the same daily reporting requirements of the futures 
market. They don't have registration, so we don't know who is impacting 
that market. We don't know who is doing it. They certainly don't have 
daily reporting requirements, so there is no transparency, and they 
don't have any kind of limitation on the speculation. Basically, we 
have a totally different regime of how futures are treated.

  As I said, the important point is that the oil futures price impacts 
the day-to-day price of oil as well. So it is very important that we 
have a futures market that functions, that is not manipulated, that has 
a certain amount of transparency to it, that there are reporting 
requirements so that if something is amiss in the marketplace, it can 
be investigated.
  Let me be clear. I don't think any oil company or hedge fund or any 
other organization wants a disruptive market that does not function 
properly on market fundamentals. That is not good for anybody. So 
everybody should think that somehow hamburger cannot be more important 
to America than oil as it relates to our economy, and yet we have given 
all of these exemptions to oil and said we don't need to know this. We 
don't need to know this information. It is apparent at these prices 
that market fundamentals are not working. Supply and demand is not 
working.
  We as a body basically said we want a prohibition on manipulation of 
oil. We made it illegal for any person to directly or indirectly use 
``any manipulative or deceptive device or contrivance'' in connection 
with the wholesale purchase of crude oil or petroleum distillates. And 
we said any violators of that law could be fined up to $1 million a 
day. We did that in December. I think that $1 million per day is a 
pretty stiff fine to deter people from manipulating the market.
  We also said anybody who knowingly provides false or misleading 
information about the wholesale of crude oil or gasoline prices to a 
Federal department or agency can also be fined up to $1 million per 
day.
  We believe when we look at the Enron case and we look at some of the 
information that has been provided in these other markets where there 
has been manipulation, that providing false information was exactly the 
way we caught and understood exactly how people were manipulating the 
market.
  That is the legislation that Senator Reid and the Democrats pushed 
and got bipartisan support for in the Senate and we passed in December 
of last year.
  What we have been waiting for is the FTC to act. We have been waiting 
for the administration to enforce that law. We have been waiting for 
them to enforce that law by writing the rules and regulations that will 
police the oil market and catch the manipulators of oil prices in this 
country.
  The good news is the FTC is acting. The FTC, within the last half an 
hour, 40 minutes, has issued their rule. I have it here. This is the 
new rule.
  It has to go through a public comment period. It has to have the 
input, I am sure it will be from hundreds of people who will want to 
say this is how I think this rule should work. I certainly encourage 
consumers and consumer organizations and my colleagues in the Senate to 
all respond to this rule because it will be critical that we hear from 
people.
  I think the Chairman of the FTC, Chairman Kovacic, has done a good 
job saying in a press release just issued:

       We understand consumer prices are being hurt by high gas 
     prices and that the Commission remains vigilant in using this 
     authority to prevent unlawful behavior that affects gas 
     prices.

  I congratulate the FTC in issuing this rule. But I want people to 
understand that this rule in its final implementation is what is going 
to say to those individuals who are manipulating markets--we don't know 
yet about oil markets. We certainly know we have found manipulation of 
electricity markets, we have found manipulation of natural gas markets, 
we have found manipulation of propane, and we are going to use this law 
and this new rule to police the oil markets and stop any kind of 
activity that is spiking the price of gasoline and ruining our economy.
  I can't say how important it is that we move forward on this rule. I 
can't tell you how critical it is because without the proper tools, 
without the proper policing and a market careening out of control--we 
had an oil analyst who basically said--I don't know if we have that 
chart--but he basically said Government has to act because there is too 
much speculative power running around in the market without the 
oversight, and Government needs to act. If it does not act, prices are 
going to keep going up.
  I wish to give an example because the Amaranth case was a natural gas 
case where a hedge fund basically manipulated the market and sold a 
bunch of product into the market, physically a whole month of supply, 
to crash the price and then basically end up capitalizing on the fact 
they had so much control of the market.
  Back to a chart that we have on beef and cattle futures, it is the 
issue that when you look at those markets, one of the reasons you 
police markets and you look at speculative limits and you have exchange 
registration is because you want to make sure that not one big player 
has so much market share it ends up using that in a manipulative way, 
which is what Amaranth did.
  After Amaranth basically collapsed and the Federal Energy Regulatory 
Commission went after them for the manipulation of these prices, the 
price of natural gas fell 38 percent. After they got out of the market, 
the natural gas price fell 38 percent.
  I am not saying this is going to happen, but imagine if that same 
thing happened in the oil markets. What would happen if we found out 
there was a big player such as Amaranth that was helping drive up the 
price and you actually could see a reduction of 38 percent from where 
we are today at nearly $118--$110 a barrel. Oil would be about $75 a 
barrel. Instead of paying $3.60 a gallon, we would be paying more like 
$2.40 or $2.50 a gallon. That is what would happen.
  It is critical we police these markets and we use this new rule and 
that consumers respond and that we do our job in the Congress in making 
sure Federal regulators are on top of what is an out-of-control oil 
market that is not based on supply and demand, that is based on some 
other market activity that cannot be explained. Where there is smoke I 
think there is fire. We certainly see a lot of smoke in the oil markets 
that I hope will lead the FTC to investigate vigorously, with this new 
rule, the potential manipulation and stop these practices to help save 
our economy and save consumers who are getting gouged at the pump.
  We are going to continue next week by reminding our colleagues of 
what we need to do. We need to protect consumers by closing the Enron 
loophole. As I said, beef futures have all these requirements but oil 
doesn't. We need to require the oversight of all oil futures markets. 
This was No. 3 on our list, get the FTC to act with new rules. The FTC 
did it tonight, issued their rule. I have not even read it in full. I 
am going to do that as soon as I leave the floor. I am going to see how 
good the rule is in basically enforcing the power we gave them in the 
December 2007 Energy bill.
  We need to get the DOJ in the act because I think the FTC, while they 
have the new authority, should be with the CFTC, they should work with 
the SEC. They did a great job on the Enron task force in compiling 
across multiple agencies the case against the manipulation of the 
electricity markets. They should do the same for the oil markets.
  Then, as I said before, I think making sure the President has 
emergency authority on price gouging, such as 28 States do, is also an 
important tool, and I am sure we will be talking more about that in the 
future.
  Bursting the energy price bubble is what we need to do. We need to 
burst the energy price bubble that we cannot explain. We do not know 
why it is there. It is not supply and demand. It is something else 
going on, and we need to get to the bottom of it. After Amaranth, 
pricing dropped to the lowest level in 2\1/2\ years after their getting 
out of the market, after their manipulation, after a hedge fund came in 
and tried to manipulate the natural gas market. When we saw the lowest 
rate for natural gas in 2\1/2\ years after we got that manipulator out 
of the market, it tells us we have to be vigorous in this battle. We 
have to be aggressive in protecting our consumers, and that is what the 
Senate is going to continue to do.

[[Page S3733]]

  I know the Presiding Officer is on board in that effort. I know many 
of my colleagues are too. I know Senator Reid is as well.
  I encourage my colleagues to weigh in on this issue of the FTC rule 
and policing of the oil markets. I hope we have hearings in the 
Commerce Committee to do that and that we show the American public the 
Senate is serious about protecting consumers from the high price spikes 
in oil that cannot be described as simply market supply and demand.
  I yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Ms. CANTWELL. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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