[Congressional Record Volume 154, Number 150 (Monday, September 22, 2008)]
[Extensions of Remarks]
[Page E1852]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     COMMODITY MARKETS TRANSPARENCY AND ACCOUNTABILITY ACT OF 2008

                                 ______
                                 

                               speech of

                            HON. BART STUPAK

                              of michigan

                    in the house of representatives

                      Thursday, September 18, 2008

  Mr. STUPAK. Mr. Speaker, I rise in support of H.R. 6604, the 
Commodity Markets Transparency and Accountability Act.
  As chairman of the Oversight and Investigations Subcommittee of the 
House Energy and Commerce Committee, I have held two hearings on 
excessive speculation and its effect on energy prices.
  We learned that in 2000, physical hedgers--businesses like trucking 
companies, airlines, and other industries that need to hedge to ensure 
a stable price for fuel in future months--accounted for 63 percent of 
the oil futures market.
  Today, physical hedgers only control 19 percent of the market. 
Approximately 81 percent of the market has been taken over by swap 
dealers and speculators, a considerable majority of whom have no 
physical stake in the market.
  Since the Enron loophole became law in 2000, there has been a 
dramatic shift as physical hedgers continually represent a smaller 
portion of the market. This excessive speculation is a significant 
factor in the price Americans are paying for gasoline, diesel, and home 
heating oil.
  Just yesterday, JP Morgan's global chief investment officer, Michael 
Cembalest, wrote: ``there was an enormous amount of speculation pent up 
in energy markets * * * and it wasn't just the supply-demand equation. 
Oil will rise again, and we need solutions to energy supplies, but $140 
in July 2008 was ridiculous.'' Even the speculators admit they're 
inflating energy prices.
  Last week, the Commodity Futures Trading Commission, CFTC, released a 
report that it claims shows that speculators are not affecting prices.
  However, CFTC even admits in its own report: ``This preliminary 
survey is not able to accurately answer and quantify the amount of 
speculative trading occurring in the futures markets.''
  How can the CFTC tell Congress that speculation is not a problem if 
they can't even tell us how much speculation is occurring? This is a 
study that made its conclusions before it had the facts to back them 
up.
  I encourage Members and those watching at home to go to the website: 
accidentalhuntbrothers.com. On this website is a report by Michael 
Masters, 1 of 11 witnesses who testified at our June 2008 O&I hearing.
  This report shows what my colleagues and I have been saying for a 
long time. The price of oil has become completely detached from supply 
and demand fundamentals.
  As the report shows, it's very simple: When index speculators pour 
large amounts of money into commodities markets, prices go up. When 
these same speculators pull their money out, prices go down.
  As you can see in this chart, from January through May 2008, index 
speculators poured more than $60 billion into commodities, causing 
crude oil prices to increase $33 a barrel.
  Then, starting on July 15, 2008, index speculators reduced their 
investments by $39 billion, causing prices to decrease by about $29 a 
barrel.
  Even more startling, index speculators completely ignored supply and 
demand signals.
  During the first 3 months of 2008, index speculators bet on high 
energy prices when the Energy Information Agency, EIA, forecast 
increasing supply, which should mean lower prices.
  In July, when EIA forecast that demand would exceed supply, a sign 
that oil prices should go up, index speculators began to pull $39 
billion out of the market.
  Today, we face hurricanes in the Gulf of Mexico, civil war in 
Nigeria, OPEC considering production cuts, the situation in Georgia, 
and continuing violence in the Middle East. In the past, each of these 
events would have sent crude oil prices through the roof.
  However, because speculators have been pulling their money out of the 
market, crude oil is at $91.49 a barrel. This is $53.67 lower than it 
was just 2 months ago.
  If there is anyone that can show me any reason, other than 
speculators pulling out of these markets, that the price of crude oil 
should drop $53 in 2 months, I'd like to see it.
  While the Peterson bill may not have everything that I've called for 
in my legislation, the Prevent Unfair Manipulation of Prices, PUMP, 
Act, it does take significant steps to rein in excessive speculation.
  The bill would strengthen position limits on regulated markets, and 
establish an advisory board to set position limits while still 
protecting physical hedgers. It addresses the foreign boards of trade 
loophole, and properly limits the bona fide hedging exemption to 
physical hedgers.
  The legislation would improve the information available to the 
Commodity Futures Trading Commission, significantly improving CFTC's 
ability to monitor energy markets. And, should the CFTC find excessive 
speculation on unregulated markets as a result, CFTC can take the steps 
necessary to correct it.
  I was proud to support this legislation in July, when it should have 
passed. Unfortunately, 16 of my Republican colleagues decided to change 
their vote, playing politics instead of providing relief to Americans 
facing high energy prices.
  While it has not been the only factor, speculators have seen that 
Congress is serious about acting to curb excessive speculation, and the 
markets are responding accordingly.
  I urge members to continue their support for H.R. 6604, so we can 
continue to show speculators that Congress is serious about protecting 
American consumers.
  I thank Chairman Peterson and his staff for working with me and my 
colleagues to produce this legislation. I urge my colleagues to vote 
for H.R. 6604, the Commodity Markets Transparency and Accountability 
Act, to rein in excessive speculation and provide your constituents 
with relief from high gas prices.

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