[Congressional Record Volume 154, Number 72 (Friday, May 2, 2008)]
[Senate]
[Pages S3737-S3738]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        POLICING THE OIL MARKETS

  Ms. CANTWELL. Mr. President, I rise this morning to make sure the 
American people know that Democrats want to make sure that oil markets 
are policed. Democrats want to make sure the oil markets are not being 
manipulated, and Democrats are going to make sure the oil markets, in 
fact, are going to be policed by the Federal Government.
  Over the last several years, several energy companies, including 
Amaranth, Marathon Oil, and British Petroleum have been under 
investigation for the manipulation of petroleum and natural gas 
markets. As a result of that investigation, British Petroleum now must 
pay approximately $373 million for conspiring to corner the market and 
manipulate the price of propane carried through the Texas pipeline.
  In another example, in 2006, a manipulative scheme to game the 
natural gas market by the now defunct hedge fund Amaranth, cost 
consumers upwards of $9 billion. In July of last year, Marathon Oil 
agreed to pay $1 million in fines to the CFTC to settle charges that 
Marathon's petroleum subsidy had attempted to manipulate crude oil 
prices.
  So we have examples of natural gas and oil markets being manipulated, 
and Democrats want to make sure that oil markets are going to be 
policed. We want to make sure there is not manipulation of supply. We 
want to make sure there is not false reporting of information. We want 
to make sure there is not cornering of the market. We want to make sure 
there is not rogue trading.
  That is why I am pleased the FTC has taken at least a first step in 
issuing a rule that I think will help establish the framework by which 
these markets can be more thoroughly investigated.
  The FTC is recognizing in its rule--the rule that it issued last 
night--that they need to base this on a law that is about manipulative 
practices or using manipulative devices. There is a large body of case 
law starting with the Securities and Exchange Commission now being used 
by the Federal Energy Regulatory Commission, that has become, as the 
Supreme Court said, ``a judicial oak which has grown from little more 
than a legislative acorn.''
  What they are talking about is just the simple concept put into 
Federal statute that you should not have manipulative devices or 
contrivances as it relates to the stock market, as it relates to 
commodities, as it relates to now the natural gas and electricity 
markets, and now, after the FTC's action last night, as it relates to 
the oil markets.
  But Democrats are going to make sure the FTC does its job. I am 
calling on our leadership to have oversight hearings of this FTC 
rulemaking process. The American public needs to be in on this process 
of deciding exactly how this rule is going to be developed. We are 
going to protect consumers in making sure there is a strong statute on 
the books. We want to make sure that in this final rule the impact of 
any kind of manipulative, planned reductions by refineries as a scheme 
just to reduce supply is covered under this law; that any kind of false 
or misleading reporting is covered under this law; and that the FTC 
recognizes the great work that was done by the Federal Energy 
Regulatory Commission in their adoption of this rule.
  In fact, the rule that is being put out by the FTC actually discusses 
in detail the cases of Amaranth and Enron, which I think is a good sign 
because it is in those cases that we learned exactly how the 
manipulation of these markets takes place.
  In fact, what we saw with Amaranth and what they did is they ended up 
selling shares to try to crash the market to lower the price after they 
already had contracts for a higher price. So they made money by 
basically getting people to sign up for contracts at a higher expense 
and then forcing the market to lower the price so they had a higher 
profit margin. They ended up having a huge position in the natural gas 
market and, as I said, it cost consumers over $9 billion.
  The interesting thing is, when they got out of the market and there 
was

[[Page S3738]]

the pursuit by the Federal Regulatory Commission of this issue, natural 
gas prices dropped 38 percent--38 percent because we had a bad actor 
out of the marketplace.
  So it is critical that we have this aggressive action and probe of 
the oil markets. It is critical that we give the Federal regulators--
the FTC and the FERC, if they need to be involved, the CFTC, as well as 
the DOJ whom I have called on to be involved--the tools they need. But 
Democrats are going to make sure we police the oil markets.
  If you think about that and you think about the fact that oil prices 
are 100 times over what they were a year ago, and if you had some sort 
of activity that was driving up that price--I am saying it is not 
supply and demand, it is not basic supply and demand. We haven't had a 
supply disruption. We haven't had that big of a change in the demand. 
So something is going on in the marketplace.
  If we would do our job of investigating, we would make sure there is 
a bright line there for the consumer, for the American people who are 
paying too much at the pump right now, to say that these kinds of 
manipulative behaviors will not be tolerated.
  The challenge we have is, when we don't have some of these markets 
having the transparency and the oversight, or people who are supposed 
to be the policemen on the beat, as well as the FTC not doing its job, 
then these markets have a lot of activities that can actually drive up 
the price. When we think about the Amaranth case, just imagine what 
would happen if you could actually lower the price because you get bad 
actors out of the market.
  That is what we are simply saying. Let's do our job here and have the 
oversight hearings of this FTC rule and investigation of the oil 
markets. Let's do our job in making sure the consumer is represented in 
the development of this rule and a tough Federal statute so that 
consumers can have a little relief at the pump.
  I noticed last night this was the first time gas prices didn't rise 
overnight. I also took note in the paper this morning of the CFTC 
Chairman's comment which was an indication of the fact that oil prices 
might have moved because, instead of investing in commodities, people 
have taken money out of those commodities and put them in other places 
in the stock market. People should be aware that Congress and the FTC 
are looking into any kind of manipulative practices when it comes to 
the oil market. Even if the rule isn't in final adoption today, the 
fact that we are going to be aggressive at protecting consumers and 
looking into this kind of manipulative practice, I believe, can help 
give consumers relief at the pump.
  So let's get about doing our job. Let's get about protecting 
consumers in what is not a rational gas market today, and get about 
helping our economy by doing our job here and having the oversight 
hearings that it is going to take to make sure this rule gets developed 
with a strong framework that can be used to root out manipulation in 
the oil markets.
  I thank the President, and I yield the floor. I suggest the absence 
of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. CASEY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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