WASHINGTON -- Sen. Byron Dorgan, D-N.D., has praised the decision of Commodity Futures Trading Commission Chairman Gary Gensler to hold hearings to determine whether excessive speculation is causing energy prices to go up and whether it should apply to energy futures the kind of position limits it places on speculators in agricultural products -- but that he still wants action from the agency.
The CFTC oversees the nation's commodity exchanges, but exempted certain types of futures activity from regulation.
Gensler said July 7 the commission will conduct a series of hearings in July and August to seek input from the public -- consumers, businesses and market participants -- to determine how the agency should use all of its existing authorities to accomplish its mission.
"Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities, such as crude oil, heating oil, natural gas, gasoline and other energy products. This will include a careful review of the appropriateness of exemptions from these limits for various types of market participants," he says.
No dates or locations for the hearings were announced.
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Dorgan's skepticism
Dorgan, a longtime CFTC critic, said, "If these hearings lead to rigorous federally imposed position limits across all markets on oil speculators looking for a quick buck at the expense of American consumers, then that will be action I can applaud. Such action is long overdue and essential to stopping the excess speculation in our commodity markets, especially in crude oil. Despite my efforts to stop this speculation, the CFTC was irresponsible last year when it did nothing as oil prices skyrocketed to almost $150 a barrel and gas prices jumped to more than $4 a gallon as a result of excess speculation."
Dorgan noted that he voted against Gensler's confirmation.
"I welcome the announcement of hearings, but it is only concrete action that will prove the CFTC is finally an effective cop on the beat protecting the wallets of American consumers. Revoking or limiting exemptions for speculators and strong federal position limits for speculation are the kind of actions we are all waiting for," he says.
Some senators including Dorgan were skeptical of Gensler because he worked for Goldman Sachs and was considered a proponent of light regulation when he served in the Treasury Department during the Clinton administration.
Facing the problem
Sen. Carl Levin, D-Mich., chairs the Homeland Security Permanent Subcommittee on Investigations, which has undertaken several investigations of the impact of speculation on commodity markets,
"It is a relief to know that the Obama administration does not plan to stand by silently while inflated crude oil prices top $70 per barrel despite ample oil supplies and low demand," Levin said.
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He added, "The CFTC already limits the number of futures contracts that one trader can hold for agricultural commodities like wheat, corn and soybeans to prevent price manipulation and excessive speculation. It's long past time to put similar limits in place for energy commodities like crude oil, natural gas, heating oil, jet fuel and diesel fuel, whose price distortions can devastate our economy. We also need the CFTC to begin reviewing and revoking the exemptions and waivers handed out to swap dealers who are now routinely exceeding standard trading limits, overwhelming our commodity markets and distorting prices."
