[Congressional Record Volume 154, Number 93 (Friday, June 6, 2008)]
[Senate]
[Pages S5361-S5362]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            HIGH GAS PRICES

  Mr. NELSON of Florida. Mr. President, we are getting ready to 
consider the gasoline bill next week and all its ramifications for the 
American public who are suffering under $4 and $4-plus gas.
  A few days ago, this Senator showed a photograph of a town in north 
Florida, Madison, FL, in Madison County, downtown, the local Shell Oil 
station. Regular in the State of Florida, reflected in that photograph 
of a few days ago, was at $4.10 a gallon.
  It goes without saying that our people are hurting. And I can tell 
you, having had 18 townhall meetings last week all over my State, that 
hurting has turned into frustration, and that frustration is turning 
into anger.
  Now, there is a new poll out this week that reflects the increasing 
number of Americans who believe it is the supply and demand of oil that 
is driving these prices to record highs--just the supply and demand. We 
know we have a very tight world oil market, and we know places such as 
India and China in fact are consuming more oil, and their demand is 
higher. We understand that makes the world's oil markets all the more 
tight. And believe it or not, because of that, and because of this 
constant amount of information coming out from the oil sector about 
supply and demand creating the tight oil market, the American people 
are believing that is the cause of these record oil prices, believing 
that translates into these very high gasoline prices.
  It is interesting because it is just at a time that the Senate has 
voted to close the so-called Enron loophole, which is perhaps the real 
culprit to blame in the shocking runup of the oil prices.
  Now, what is the Enron loophole? Back in the year 2000, legislation 
was passed that exempted oil and metals from being regulated on the 
commodity futures exchange. That meant that as contracts for future 
purchase of oil and metals are being traded, there is no government 
oversight, no government regulation of how much those can go up. So as 
long as the participants bidding for those futures contracts continue 
to bid the price of those oil contracts higher and higher, in fact the 
price of that oil on the world market continues to go higher and 
higher, much over and above what normal supply and demand would cause 
the price to be.
  This closing of that Enron loophole has just occurred. It is still in 
the works because even though it was added to the farm bill, the farm 
bill was vetoed by the President. The veto was then overridden and, 
therefore, it came into law immediately upon the override. 
Nevertheless, we found that we omitted a section of the farm bill, so 
we are going back and redoing that all over again. We just passed the 
farm bill again in its entirety in the Senate yesterday, last night. It 
does have the

[[Page S5362]]

Enron loophole closure in the bill. Presumably, that will be passed by 
the House, go down to the President for signature, he will veto it 
again, and then it will come back to both Houses for overriding, like 
we did before about 2 or 3 weeks ago, and the Enron loophole will be 
closed. There are a bunch of us, including this Senator, who were 
cosponsors of this provision. Hopefully, it is going to address this 
loophole.
  But what happened in the past? It was enacted back in 2000--in 
December of 2000. I believe that loophole, when enacted, was exploited 
by energy traders. This is based on the mounting evidence that we see 
over and over. It is at least a partial cause of the huge runup in the 
gas prices.
  Well, I think we need to do more on this Enron loophole. There have 
been some commentaries by some experts that say we should be closing it 
further. And if we need to do that, this Senator is certainly ready to 
do it. But right now what needs further examination is how we got to 
this point in the first place. How did this provision in law, leaving 
this huge hole big enough to drive a Mack truck through get to this 
point where it essentially exempted the trading of oil futures from 
Federal commodities regulation? How did that become the law of the 
land? What was the role of lobbyists and oil companies and investment 
banks and commodity speculators? We need answers to those questions.
  We have seen through testimony to the Congress and from other reports 
that unchecked commodities trading plays a very significant role in 
rising gasoline prices. We know high gas prices are not merely a 
function of supply and demand in the marketplace. In fact, we ought to 
know this from several years ago.
  A subcommittee, led by Senator Carl Levin of Michigan, found that 
supplies were mostly adequate, but it found something else was missing. 
What was the role that caused these prices to be jacked up? Just a few 
days ago, financier George Soros told our Senate Commerce Committee--in 
fact, just this past Tuesday--that a dramatic increase in commodities 
trading in recent years has contributed to the oil bubble and its 
``harmful economic consequences.''
  Indeed, loosely regulated speculators appear to have bid up oil 
prices to these unrealistic highs. There are also links between oil 
companies and investment banks in the oil futures trading. And this is 
what these reports are showing. The Senate investigations subcommittee, 
in a bipartisan way, under the leadership of Senator Levin, released a 
report finding that there was lax Federal oversight of oil and gas 
traders due to the loophole slipped into the law in 2000, and it was 
slipped in at the behest, according to the Levin report, of the now 
infamous Enron Corporation, along with oil companies and investment 
banks. That is according to the Levin report.
  Other links between soaring oil prices and vast sums of money now 
flowing through these commodity markets were uncovered by a Homeland 
Security panel and our colleague, Independent-Democrat Senator Joe 
Lieberman. In fact, a top oil executive for a major oil company 
recently testified before a House panel that crude oil, under normal 
supply and demand, ought to be around $55 a barrel, based on the rule 
of supply and demand. Yet last week it went up to $135, and it is 
somewhere in the $130-a-barrel range today.
  Mr. President, I think those investigations into the cause of the 
runup of the price of oil ought to continue. An estimated one-third of 
the amount of the runup of the price of oil can be blamed on 
speculators having poured tens of billions of dollars into the 
unregulated energy commodities markets in the wake of that so-called 
Enron loophole that deregulated those commodities markets. In essence, 
the loophole exempted electronic trading of energy and metal by large 
traders--exempted them from Federal commodities regulation. Since then 
the price of oil and natural gas has skyrocketed, and that is all 
despite reports that the supplies are mostly adequate.
  Next week we are going to try to take up legislation aimed at getting 
at this situation of high gas prices. This Senator intends to address 
this issue.

  If, in fact, as that oil company executive said, supply and demand 
ought to cause oil to be trading at $55, why is it trading in excess of 
$130? What role do the unregulated commodities markets play, and how 
did that get into law? How much of that capital out there is flowing 
into that because those markets are unregulated, thereby driving up 
that price to what we have today?
  We see one Federal agency that otherwise regulates futures trading 
has said it will investigate allegations of short-term manipulation of 
crude oil prices. The Commodity Futures Trading Commission also said it 
would work with British regulators to monitor large trades of crude oil 
by a London futures exchange known as ICE, Intercontinental Exchange. 
Some of the founding members of that intercontinental exchange, it has 
been reported, were instrumental in getting the Enron loophole through 
Congress back in the year 2000. It was ill-conceived public policy at 
best, and it should be reversed. Next week we are going to have a 
chance to do something about it because we have legislation on the 
price of gasoline coming to the Senate floor.
  By having greater oversight and regulation on oil trading, we 
obviously have to go beyond that and look to our commitment to a 
comprehensive national energy policy. Fifty percent of the oil we use 
goes into transportation, and most of that is for our personal 
vehicles. So it should not take a rocket scientist to realize we must 
focus on conservation measures like 40 miles per gallon as a fleet 
average for our vehicles. We finally broke through and got through the 
Senate 35 miles per gallon phased in over the next 12 years. Maybe we 
ought to accelerate that.
  We ought to look at providing bigger tax breaks for hybrid and plug-
in hybrid vehicles. Ultimately, we must look to the research and 
development of electric and hydrogen-powered cars.
  All of this is going to fall in the lap of the next President. The 
next President is going to have to urge us--and I hope we will support 
the next President--to enact a national energy program to transition us 
from gasoline to alternative, synthetic, and renewable fuels to power 
much of this economic engine of America.
  President Kennedy led us on such a monumental task, and that was the 
task to escape the bonds of Earth within a decade, to go to the Moon, 
and return safely. We did that. We must act with the same urgency now. 
While we are at it, we are going to have to make ethanol from things 
that we do not eat. While we are at that, we are going to have to pay 
attention to how we power, not just our cars and trucks, but our homes 
and our industries.
  We need to develop solar and wind and thermal energy and safe nuclear 
power. The world is begging for change. One of the most enormous 
changes that needs to be brought about is how we utilize and how we 
create energy and how we are going to utilize and create energy for the 
future. We have a chance to do that next week when we take up this 
legislation about the high price of gasoline.
  I yield the floor.

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