[Congressional Record Volume 159, Number 25 (Friday, February 15, 2013)]
[Extensions of Remarks]
[Page E165]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF THE HALT INDEX TRADING OF ENERGY COMMODITIES OR HITEC 
                                  ACT

                                 ______
                                 

                         HON. EDWARD J. MARKEY

                            of massachusetts

                    in the house of representatives

                       Friday, February 15, 2013

  Mr. MARKEY. Mr. Speaker, I rise today to introduce the Halt Index 
Trading of Energy Commodities, or HITEC, Act. I am reintroducing this 
bill, which was H.R. 5186 in the previous Congress, with Representative 
DeLauro because urgent action is still needed to protect our nation's 
oil and refined product commodities markets from artificial and 
excessive levels of volatility caused by the trading practices of 
certain Wall Street traders. Since 1991, Wall Street investment banks 
such as Goldman Sachs have created and marketed a new financial product 
known as commodity index funds, which are really energy speculation 
funds, gasoline gambles. These energy speculation funds track the 
financial performance of one or more commodities. If a speculation fund 
has an investment in oil and the value of oil goes up, then the value 
of the fund goes up; if the value of oil goes down, the value of the 
speculation fund goes down.
  These investments have had an adverse effect on the operation of the 
markets for the commodities that comprise the funds. Hundreds of 
billions of dollars have been invested in various energy speculation 
funds, artificially inflating the prices of our commodities. While 
these energy speculation funds may be driving up prices for many 
different commodities, they are having an especially pernicious effect 
on energy commodities. According to testimony submitted to the House 
Natural Resources Committee, excessive speculation added nearly $1.00 
to the per gallon price of gasoline last spring, and energy speculation 
funds appear to have been largely responsible. Due to the activities of 
these energy speculation funds, Wall Street investment banks have 
profited by introducing new and unprecedented levels of volatility and 
speculation into oil and refined product markets.
  Energy speculation funds have changed the very nature of our 
commodities markets. Traditionally, the commodities market was 
dominated by companies who actually used the commodities to hedge the 
business risk associated with oil or refined products prices. Large 
oil, gasoline, diesel or jet fuel consumers such as airlines, trucking 
firms, and shipping services were the largest participants in these 
markets. Indeed, in 1996, companies who actually bought oil on the 
commodities market so they could use it owned 93% of the oil futures or 
derivatives in that market. Now, however, these companies only own 37% 
of the oil futures or derivatives in that market. The bulk of the 
remaining 63% is owned by speculators who have invested in these energy 
speculation funds, none of whom will actually use any of the oil or 
natural gas in which they have invested.
  Given how much these energy speculation funds have hurt consumers and 
business, one might at least think that these energy speculation funds 
are good investment vehicles. Yet, all evidence is that they have 
provided mediocre returns in recent years. According to the Wall Street 
Journal, Standard and Poor's popular GSCI index provided just .08% in 
annual returns in 2012, far below the returns of the S&P 500. Worse, in 
2011, the returns from the GSCI were actually negative. Unsurprisingly, 
institutional investors like pension funds are moving away from 
investing in energy speculation funds: Not only do they hurt average 
Americans and business, but they do not even provide excellent returns 
for their investors. In truth, the only group of people who seem to be 
benefiting from the existence of these funds is Wall Street.
  Despite only being 22 years old, energy speculation funds have 
already had a profound impact on our country. They have increased the 
size of our commodities market. They have increased the volatility of 
our commodities prices. They have hurt consumers' wallets and small 
businesses by making them pay more at the pump. They have slowed the 
growth of our economy by requiring that we devote even more money to 
energy instead of creating new jobs. They do all these things, and they 
do not even provide much benefit to their own investors. These energy 
speculation funds are a danger to our economy, our financial system, 
and the average American's wallet.
  The HITEC Act will restore order to our energy commodity markets and 
end this experiment. The bill will ban all new investment in energy 
commodities like light sweet crude oil, natural gas, heating oil, and 
gasoline by these commodity index funds from the date of enactment. The 
day the President signs this bill, energy speculation funds will not be 
allowed to grow any more if they count speculators among their 
investors. Existing energy speculation funds that continue to count 
speculators among their investors will then have two years to wind down 
their investments. As the average length of a ``spot'' commodity 
contract is one year, this should allow energy speculation funds that 
continue to house speculators more than enough time to wind down their 
investments in a fair and orderly fashion.
  This bill does not prohibit energy speculation funds from investing 
in agricultural commodities like wheat or corn, nor does it prohibit 
those funds from investing in metals such as gold. The bill also does 
not implicate trading of electricity in any way, shape, or form. 
Instead, this bill just prohibits energy speculation funds from 
interfering with our energy commodities, a market that determines the 
prices for the fuels that power our economy.
  This bill will end an unnecessary and harmful source of excessive 
price volatility that has only served to benefit Wall Street traders 
and has harmed our economy by pumping up oil, gasoline, and other 
refined product prices. Enactment of this legislation will address one 
major source of the pain American consumers have recently been feeling 
at the pump, and I once again urge all of my colleagues to co-sponsor 
this critical legislation.

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