Democrats in Congress are preparing a volley against oil market speculators in their effort to counter charges by Republican frontrunner Mitt Romney that the Obama administration’s energy policies are to blame for skyrocketing gasoline prices.
A coalition of consumer groups, petroleum marketers and some industrial users said Thursday that legislation will be introduced in the House and Senate in the next few weeks that would slap new controls on oil futures markets. The goal is to curb the speculation that they say is driving up oil and gasoline prices and threatening to derail the economic recovery.
According to Mark Cooper, the chief economist of the Consumer Federation of America, and University of Maryland law professor Michael Greenberger, who in the late 1990s oversaw derivatives trading at the Commodity Futures Trading Commission, the proposed law would stop investment banks like Goldman Sachs and Morgan Stanley from selling oil-based commodity index funds; order an immediate Justice Department probe into oil speculation; and add 400 oversight staff to the CFTC to police oil and other futures markets.
“The American consumer is paying 75 cents more per gallon because of excessive speculation,” said Cooper. “That’s eating a hole in consumers’ pocketbooks and the U.S. economy.”
Given the U.S.’s declining dependence on foreign oil, which is a globally traded and priced commodity in any case, Democrats plan to point in coming weeks to oil speculators as a major cause of the recent run-up in prices, just as they did in 2008. During both price spikes, there was a coincident massive jump in the number of open crude oil futures contracts sold on the New York Mercantile Exchange. Cheaper West Texas Intermediate Crude sold for about $103.21 a barrel in late trading Thursday afternoon, over $10 a barrel more than a year ago.
The recent spike clearly has nothing to do with underlying demand, which has fallen by nearly 10 percent in the past year. “Anything over $80 is certainly linked to some extent to speculation,” said James Williams, a long-time oil industry economist at WTRG Economics.
The Securities Industry and Financial Markets Association, which represents investment banks like Goldman Sachs, refused to comment for this story.
IMPACT ON THE ELECTION
With the economy showing signs of taking off and generating hundreds of thousands of private sector jobs a month, the Romney campaign in recent weeks has shifted gears to focus attention on the pain at the pump being felt by most Americans. Gasoline prices have reached $4 a gallon in many parts of the country and are now approaching levels not seen since the height of the financial crisis, when prices also temporarily soared above $4 a gallon.