Back in July 2008, Senate GOP blocked bill limiting oil speculation
I thought I would combine a couple of posts from my colleagues at Think Progress. I’ll let you decide if there’s any connection.
I’ve never been one to say that speculators are the primary driver of oil price fluctuations, since we are at or near the peak in conventional oil production “” and that means oil prices will inevitably see higher highs and higher low. But others think they are playing a significant role now — bigger than they did in the 2008 run-up (see Goldman Sachs says speculation behind much of recent oil price rise: “Net speculative positions are four times as high as in June 2008”).
According to the Commodity Futures Trading Commission “” the government’s commodity markets watchdog “” speculative positions in energy are currently at an all-time high and several analysts (including those at Goldman Sachs) have concluded that speculation is pushing up gas prices. Thanks to the Dodd-Frank financial reform law that was signed by President Obama in July 2010, the CFTC is allowed to set “position limits” on such speculation, but the final regulations won’t be implemented until early 2012.
But the CFTC could have gotten started on its rulemaking two years earlier were it not for Senate Republicans. In July 2008, the House overwhelmingly passed a bill directing the CFTC to limit speculation in the oil market. However, Senate Republicans filibustered the bill in the Senate, preventing it from ever coming up for a final vote:
Senate Republicans on Friday blocked a vote on legislation to rein in speculation in the energy markets, instead calling for energy votes that would expand domestic petroleum production and more nuclear power development. Democrats, in a 50-43 vote, failed to gain the 60 votes needed to bring the speculation bill forward for consideration on the Senate floor.
Amongst Republicans, only Sens. Olympia Snowe (R-ME) and Susan Collins (R-ME) voted for the legislation (while Senate Majority Leader Harry Reid (D-NV) voted against it as a procedural matter, allowing him to bring the bill up for consideration later). At the time, Senate Minority Leader Mitch McConnell (R-KY) said that “we don’t have a problem with taking a look at speculation,” but that the GOP would refuse to move forward unless the bill included opening up more federal land for drilling (which would have a negligible effect on gas prices).
Having the CFTC begin in July 2008 the work that it began last July would have brought limits on speculation online this summer, instead of next, if the CFTC were working on the same timetable it is now. Technically, Dodd-Frank called for speculation limits to be in place three months ago, but the CFTC missed its deadline, in part due to conservative opposition to the limits.
Purely coincidentally, no doubt, while the public suffers through higher gasoline prices, there’s one group that stands to benefit, a group that just happens to be a major donor to the GOP, as TP reports:
The country’s five biggest oil companies “” BP, Chevron, ConocoPhillips, ExxonMobil, and Shell “” made a total profit of nearly $1 trillion over the last ten years. In 2008, ExxonMobil broke its own record for most profitable year for a public company in history by making more than $45 billion. And according to an analysis in the Wall Street Journal, rising oil prices in 2010 mean that Big Oil’s profits this year “could come close to rivaling the industry’s record year in 2008“:
First-quarter crude prices averaged about $100 a barrel, or about 20% higher than a year ago, pushed upward by oil-supply concerns due to political unrest in the Arab World and a recovering global economy. That spike is expected to lift earnings by about 50% at Exxon Mobil Corp., and about 33% each at Chevron Corp. and ConocoPhillips, compared with a year earlier.
Despite these sky-high profits, House Republicans voted unanimously last month to preserve the billions in subsidies that oil companies receive from the federal government every year. Gas prices in many parts of the country are currently higher than $4 per gallon.