[Congressional Record (Bound Edition), Volume 154 (2008), Part 10]
[House]
[Pages 14512-14513]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           HIGH ENERGY PRICES

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Michigan (Mr. Stupak) is recognized for 5 minutes.
  Mr. STUPAK. Mr. Speaker, the price of crude oil has doubled over the 
past year. Oil is now at $136 a barrel, gasoline is at $4.11 a gallon, 
diesel prices are at $4.73 a gallon. As a result, citizens and 
industries across Northern Michigan and our great country are hurting. 
Airlines are eliminating service to 100 cities, laying off thousands of 
workers, and projecting up to $13 billion in losses due to jet fuel 
price increases that cannot be passed on to consumers. Truck drivers 
are going out of business, and many more are just parking their trucks 
because they actually end up losing money after paying so much money 
for diesel. Loggers and farmers face increased costs at all stages of 
their operations, from planting and harvesting, to transporting their 
product to market. As a result, high energy prices have caused 
significant increases in the cost of food.
  There is no way to justify the doubling of oil prices based simply on 
supply and demand. And despite the false promises by the minority party 
here in Congress, Democrats in Congress are addressing the energy 
issues. We are looking for more areas to begin immediately drilling for 
oil, conservation of energy, passing gas price gouging legislation, and 
ending excessive speculation in the energy futures trading market.
  The Government Accountability Office found that the volume of trading 
in energy commodities has skyrocketed, specifically after the Enron 
loophole was enacted in 2000. The Government Accountability Office also 
found that, while trading has doubled since 2002, the number of 
Commodity Futures Trading Commission staff monitoring these markets has 
actually declined.
  Between September 30, 2003 and May 6, 2008, traders holding crude oil 
contracts jumped from 714,000 contracts to more than 3 million 
contracts. This is a 425 percent increase in trading of oil futures in 
less than 5 years. Since 2003, commodity index speculation has 
increased 1,900 percent, from an estimated $13 billion to $260 billion. 
The 1,900 percent increase in commodity index speculation has inflated 
the price of crude oil by approximately $37 a barrel. Other experts 
estimate it could be even more.
  On June 23, 2008, the Oversight and Investigations Subcommittee that 
I chair held a hearing on the effects speculators have on energy 
prices. This was the sixth hearing that the Energy and Commerce 
Committee has held on gas prices over the past 2 years. Fadel Gheit, 
managing director and senior oil analyst at Oppenheimer & Company, 
testified that, ``I firmly believe that the current record oil price in 
excess of $135 per barrel is inflated. I believe, based on supply and 
demand fundamentals, crude oil prices should not be above $60 a 
barrel.''
  In 2000, physical hedgers, businesses like airlines that need to 
hedge to ensure a stable price for fuel in future months, accounted for 
63 percent of the oil futures market. Speculators accounted for 37 
percent. By April of 2008, physical hedgers only controlled 29 percent 
of the market. What we now know is that approximately 71 percent of 
this market has been taken over by swap dealers and speculators, a 
considerable majority of whom have no physical stake in the market. 
Over the past 8 years, there has been a dramatic shift as physical 
hedgers continually represent a smaller and smaller portion of the 
market.
  The New York Mercantile Exchange, NYMEX, has granted 117 hedging 
exemptions since 2006 for West Texas Intermediate crude oil, many of 
which are for swap dealers without physical hedging positions. This 
excessive speculation is a significant factor in the price Americans 
are paying for gasoline, diesel, and home heating oil.
  In May 2008, the International Monetary Fund compared crude oil over 
the past 30 years to the price of gold. Gold prices are not dependent 
on supply and demand, and have been viewed as a highly speculative 
commodity. The IMF analysis shows that crude oil prices track increases 
in gold prices.
  What this means is that oil has been transformed from an energy 
source into a financial asset like gold, where much of the buying and 
selling is driven by speculators instead of producers and consumers. 
Oil has morphed from a commodity into a financial asset, traded for its 
speculative value instead of its energy value. Even the Saudi oil 
minister has argued that high oil prices are due to excessive 
speculation in the markets.
  As former Secretary of Labor Robert Reich noted on National Public 
Radio a few weeks ago, the problem is the government's failure to curb 
excessive speculation.
  There are significant loopholes that exempt energy trading from these 
protections against excessive speculation: The Enron loophole, the 
Foreign Boards of Trade No Action letters, the Swaps loophole, and the 
Bona Fide Hedging Exemption. While the recently passed farm bill 
addressed the Enron loophole for electronic trading of natural gas, a 
significant portion of the energy trading continues to be exempt from 
any Commodity Futures Trading Commission action to curb excessive 
speculation.
  For 3 years, I have looked into excessive speculation in the energy 
markets. My latest bill, the PUMP bill, H.R. 6330, would end all of 
these exemptions to ensure that excessive speculation is not driving up 
these markets beyond the fundamentals of supply and demand.

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