"GOP Admits Speculation Is Increasing Oil Prices, Moves To Gut Speculation Watchdog Anyway"
The Commodity Futures Trading Commission (CFTC) — which is charged with policing the country’s futures markets — said last week that speculation on energy futures, including oil, is at an all-time high. The Dodd-Frank financial reform law gave the CFTC the ability to issue limits on oil speculation, but agency missed the deadline for implementing the new rules, partly due to reluctance from conservative members of the CFTC board (which is a problem President Obama can address in June).
But even if the CFTC were stepping up, budget cuts favored by House Republicans would render market oversight vastly more difficult. H.R. 1, the House Republican-approved spending plan for the remainder of 2011, cuts the CFTC budget by nearly one-third, which would force the agency to lay off nearly 30 percent of its staff. CFTC Chairman Gary Gensler has said that if the GOP budget cuts were implemented, “We would not be able to police…or ensure transparent markets in futures or swaps.”
And Republicans are forging ahead with these budget cuts even though they agree that oil speculation is increasing prices:
Rep. Ed Whitfield (R-Ky.), a senior House Energy and Commerce Committee member, recalled prior oil-speculation hearings and said “there was no question that that had some impact” on the 2008 uptick. “I think there is a combination of reasons for the recent spike,” he said in an interview yesterday.
Rep. Mike Simpson (R-Idaho), chairman of the House Appropriations subpanel in charge of EPA and the Interior Department, said policies at the departments he oversees play a role in rising prices but agreed that speculation does as well. “Traders look out and see what’s about to potentially happen, so it has to do with speculation,” Simpson said in an interview. “That adds to the overall equation.”
Both Whitfield and Simpson voted for the budget cuts in H.R. 1. Rep. Walter Jones (R-NC), however, voted against H.R. 1 (one of just three Republicans to do so) and sent a letter to the CFTC asking that it enforce the speculation limits set out in Dodd-Frank. “Most oil market experts agree that excessive, unnecessary speculation by Wall Street traders is part of the problem,” Jones wrote. “Further delay by the commission leaves consumers and markets exposed to manipulation at a time when this nation can least afford it.”
Gensler appeared before a House appropriations subcommittee today to request increased funding for the CFTC, but the subcommittee’s chairman, Rep. Jack Kingston (R., Ga.), was unmoved.