Republicans have, for the last several weeks, been lambasting President Obama for the nation’s high gas prices, while promoting so-called solutions — like authorizing more offshore oil drilling — that won’t bring down gas prices. At the same time, House Republicans are actively undermining the agency charged with policing manipulation in the oil markets.
ExxonMobil CEO Rex Tillerson admitted earlier this month that, according to traditional supply and demand, oil should cost about $60 or $70 per barrel, instead of hovering around $100. Analysts at Goldman Sachs estimated that speculation was adding roughly $27 per barrel earlier this month. Instead of addressing this clear problem, House Republicans have proposed cutting the budget of the Commodity Futures Trading Commission — which oversees trading in energy markets — by 15 percent from its 2010 level:
The CFTC’s budget would fall to $172 million from $202 million under the plan to be considered tomorrow by the agriculture subcommittee of the House Appropriations Committee. It “provides the necessary resources” for the CFTC to fulfill its duties, Representative Jack Kingston, a Georgia Republican and subcommittee chairman, said in a statement. President Barack Obama had requested $308 million in his 2012 budget proposal.
Since 1990, speculators have more than doubled their share of the oil futures market. Back then, they composed roughly 30 percent of the market; they make up nearly 70 percent today. According to the CFTC, speculative positions in energy markets — oil and otherwise — are at an all-time high.
As Mike Masters and Dennis Kelleher of the nonprofit Better Markets wrote in Politico today, “excessive speculation defeats the purpose for the commodity markets, which have been largely taken over by new speculators from the capital markets gambling on future price moves. If this practice stops, prices for commodities such as oil — and gasoline — will fall.” However, House Republicans are more interested in scoring cheap political points off of unworkable solutions than actually allowing regulators to police the marketplace and protect consumers.
And, of course, cutting the CFTC’s budget not only allows speculations to continue running rampant, but also furthers the GOP’s goal of undermining the Dodd-Frank financial reform law. “We went to the brink of economic disaster. Congress gave us the directives in Dodd-Frank to ensure that doesn’t happen again, and now there are those who would keep us from having the budget to do the job,” said CFTC Commissioner Bart Chilton.
Cross-posted at The Wonk Room.