[Congressional Record (Bound Edition), Volume 158 (2012), Part 6]
[Extensions of Remarks]
[Page 8198]
[From the U.S. Government Publishing Office, www.gpo.gov]




    H.R. 5186, THE HALT INDEX TRADING OF ENERGY COMMODITIES OR HITEC

                                 ______
                                 

                         HON. EDWARD J. MARKEY

                            of massachusetts

                    in the house of representatives

                          Friday, June 1, 2012

  Mr. MARKEY. Mr. Speaker, I rise today to discuss H.R. 5186, the Halt 
Index Trading of Energy Commodities, or HITEC, Act. I recently 
introduced this bill with Representatives Frank and DeLauro because I 
believe urgent action is 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 been incredibly popular with investors but 
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 this spring, and energy speculation funds appear to be 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.
  Despite only being twenty-one 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. 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 urge all of my colleagues to co-sponsor this 
critical legislation.

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