[Congressional Record (Bound Edition), Volume 154 (2008), Part 5]
[Senate]
[Pages 6857-6858]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         OIL MARKET SPECULATION

  Mr. DORGAN. Mr. President, the final matter I want to talk about 
today is this issue of the price of oil and the price of gasoline and 
excessive speculation. There has been some discussion today about this, 
and I want to make this point.
  We have seen a dramatic runup in the price of oil and, therefore, the 
price of gasoline. There is no justification with respect to the 
fundamentals of oil and supply and demand for that. There is no 
justification for it at all, but something has changed in this country. 
What has changed is the futures market has become an orgy of 
speculation.
  Let me quote a man named Mr. Fadel Gheit, a top analyst from 
Oppenheimer and Co. He has been in this business for 30 years. He said 
this a couple of months ago.

       There is absolutely no shortage of oil. I'm absolutely 
     convinced that oil prices shouldn't be a dime above $55 a 
     barrel. Oil speculators include the largest financial 
     institutions in the world. I call it the world's largest 
     gambling hall. It's open 24/7. It's totally unregulated. This 
     is like a highway with no cops and no speed limit and 
     everybody's going 120 miles per hour.''

  This is happening in the futures market. You need a futures market to 
hedge. You need it for liquidity. I understand that. What has happened 
to the futures market is pretty bizarre. We now see on the futures 
market 20 times the amount of oil bought and sold every day than is 
used every day. Twenty times more is bought and sold than is used. For 
the first time, we see hedge funds up to their neck in the futures 
market. Is it because hedge funds love oil? No, they don't know 
anything about oil. Do they want oil delivered to their offices? Do 
they want oil delivered to their homes? No. They never want to own any 
oil. They want to buy things they will never get from people who never 
had it. That is the way the futures market works. These people are 
speculating. Hedge funds are neck deep speculating in oil futures, and 
for the first time investment banks have joined them. So you now have 
big investment banks and big hedge funds with a presence in the futures 
market like never before. They have all these commodity corners in 
their company now, and they are hiring more, and they are speculating 
at an unbelievable rate.
  I am told, and I have read, that investment banks for the first time 
are even buying oil storage capability to buy oil and take it off the 
market. Why? To wait until it increases. So now we have oil upwards to 
$120 a barrel because we have so much rampant speculation or outright 
gambling in these markets.
  What does that mean for the folks driving a Chevrolet down the road, 
getting low on gas and trying to figure out how to get to a gas pump, 
and how to

[[Page 6858]]

pay the bill when they get there? Well, the folks in the hedge funds, 
these folks in the investment banks on these commodity markets that are 
engaged in the 24/7 casinos, are going to the bank. Man, they are going 
to the bank big time. I am talking billions and billions of dollars. It 
is pretty unbelievable. When you have a person drive up to the gas pump 
and fill that car with gas, a portion of that money now goes to this 
carnival of speculation in the futures market to reward the 
speculators. A portion of it, of course, goes to the OPEC cartel too. 
These are folks who sit around in a closed room with a locked door and 
make decisions about price and about production.
  I might add, while I am at it, that Saudi Arabia, by the way, has 
800,000 barrels a day less production on the market than they did 2 
years ago--800,000 barrels a day, every day. That means a lot in terms 
of what might happen in that market.
  So we have a lot of things going on here. What should we do about it? 
Well, in addition to all of that, the Bush administration is deciding 
they want to stick, and they are sticking, 60,000 to 70,000 barrels of 
oil underground every single day in something called the Strategic 
Petroleum Reserve. We have an SPR to save for a national emergency. 
Well, they are buying oil at $118 a barrel coming off the Gulf of 
Mexico as a royalty in kind transfers. They are taking $118-a-barrel 
oil and putting it in the ground, 60,000 to 70,000 barrels a day.
  With oil at record highs, it is Byzantine to see this administration 
saying we have to do more to fill the SPR. This is at a time when the 
Strategic Reserve is 97 percent filled. So they take oil out of the 
supply, which puts upward pressure on oil and gas.
  When the supplemental appropriations bill comes to the floor of the 
Senate, I intend to offer that amendment as well, to stop putting oil 
underground in SPR when oil is above $75 a barrel. I mean, this doesn't 
take a reservoir of common sense. It just takes a few grains of common 
sense from somebody who might actually help to fix this problem.
  What I also want to do is to increase the margin requirements on the 
exchange. If you buy stock on margin, you pay a 50-percent margin 
requirement to buy stock. If you want to control oil by going into the 
futures market for oil, you pay 5 to 7 percent. You pay a 50-percent 
margin for stock, but 5 to 7 percent for oil. If you want to control 
$100,000 worth of oil, it will cost you $5,000 to $7,000. That doesn't 
make any sense.
  That encourages speculation. That encourages the speculation that 
pushes the runup of these prices. I believe the margin requirement 
ought to be at least 25 percent at this point, during this period of 
aggressive speculation. So I am putting together a piece of legislation 
on that as well.
  You know, I want this country to develop an energy policy that makes 
us much less dependent on foreign sources of oil, engages in much more 
conservation, and much more efficiency. We should produce more. I am 
one of the four Senators who helped pass the legislation finally that 
opened up Lease 181 in the Gulf of Mexico in 2006. So I believe in 
additional production. I believe we ought to conserve more. I believe 
we need more efficiency, and I believe we need to pay much more 
attention to renewable energy.
  All those things are important. All of them are important. But right 
at the moment we have a circumstance where we have an administration 
sticking oil under the ground at the wrong time, which puts upward 
pressure on oil and gas. We also have hedge funds and investment banks 
hip deep in the futures market speculating and making billions of 
dollars on speculating. At the same time, they are driving up the price 
of oil and gas for American families and doing great damage to this 
country's economy.
  It is not just the family, and it is not just the business. It is not 
just the truckers and not just the airlines that are hurt. This country 
is experiencing significant economic damage as a result of the runup in 
these prices. I think there are reasons for us to come to the floor on 
an urgent basis and take obvious steps to deal with it. I have 
mentioned several, and there are more. But I only want to make the 
point that this is not some passing fancy that is going to be a magnet 
for a lot of discussion. This is a very serious, real problem that is 
doing significant damage to this country's economy.
  There is a lot to do next week and the week after, and I will be 
introducing some additional legislation. I will be anxiously awaiting 
the appropriations supplemental legislation. When the emergency 
supplemental appropriations bill comes to this floor, either in the 
Appropriations Committee or on this floor, we must be given the 
opportunity--and will be given the opportunity--to offer the kind of 
amendments I have suggested. This will include an amendment that stops 
the putting of oil underground in the SPR at a time when oil is priced 
at $118 a barrel. This is just one of the obvious things we can do to 
stop penalizing American consumers and damaging this country's economy.
  Mr. President, with that, I yield the floor, and I suggest the 
absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. NELSON of Florida. Mr. President, I ask unanimous consent the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________