The Commodity Futures Trading Commission (CFTC) is poised to vote on position limits for oil trading, but some senators are concerned that the rule will be too weak to diminish oil speculation. Sens. Bernie Sanders (I-VT) and Maria Cantwell (D-WA) both wrote letters to CFTC Commissioner Gary Gensler, asking him to take stronger steps to curb financial speculators like Goldman Sachs and Morgan Stanley. Sanders called the expected rule “simply unacceptable“:

Unfortunately, if recent reports in the media are correct, the final rule on position limits, as currently drafted, will do little or nothing to lower prices and it will not eliminate, prevent or diminish excessive speculation as required by the Dodd-Frank Act. At a time when the American people are experiencing extremely high oil and gas prices, this would be simply unacceptable.

Financial institutions have grossly distorted oil and other commodity markets that used to be dominated by actual buyers and sellers of the underlying products. The Dodd-Frank Act mandated that the CFTC establish stronger limits on financial speculation in commodity markets by Jan. 17, 2011. Nine months behind schedule, the CFTC is planning to establish position limits that would allow a single speculator to control 25 percent of the physically deliverable supply of oil, and to control 125 percent of the cash-settled supply.

Sanders also called on the CFTC to ban “speculative commodity index fund trading,” citing the new report by Better Markets that identifies commodity index funds as the “primary drivers of excessive speculation.”

Sen. Maria Cantwell’s (D-WA) letter to the CFTC goes into more detail about the ineffectiveness of the proposed rule. “I urge the Commission to drop the ‘conditional spot month position limit’ policy from the final ‘Position Limits for Derivatives’ rule and treat the physically-settled and economically equivalent cast-settled ‘look alike’ contracts equally,” she wrote.

Speculators drove up the price of petroleum, wounding the United States economy, billionaire investor Wilbur Ross charged today. Ross, an investor in domestic manufacturing, said the rise in the price of oil had been “hurtful” to gross domestic product growth. Fueled by unregulated, unrestrained speculators, the oil markets have surged from $35 a barrel in 2009 to $114 earlier this year, and have now slid to $82. That volatility — driven not by supply and demand but by hedge funds and profiteers — has crippled the economic recovery. In an interview on NPR, Ross said each $10 swing in the price of a barrel of oil is “probably worth one or two-tenths of a percent in gross domestic product growth”:

ROSS: The second thing is that the keys to us are things like decline in the price of petroleum. We think that $10 a barrel in petroleum is probably worth one or two-tenths of a percent in gross domestic product growth.

NPR: You mean if it goes down $10 a barrel.

ROSS: Yeah, if it goes down or up. If it goes up, it’s hurtful. Lately it’s been going down. The price of petroleum had really been driven up, mainly by speculation rather than by physical supply/demand characteristics.

NPR: Oh yeah, the war in Libya caused a lot of…

ROSS: Well, yeah, that was psychological, though. Libya’s very small potatoes in terms of world production, so there’s clearly no scarcity, it’s just a speculative thing.

Listen here:

As much as $50 of the $114 price of oil may be due to speculators, costing as much as a full percentage point of GDP growth. Furthermore, any domestic profits gleaned from expensive oil went almost entirely to the oil traders like Goldman Sachs and the Koch brothers, while working Americans suffered from high fuel costs.

Today the House debated the FY 2012 Agriculture Appropriations bill, which “cuts aid for low-income pregnant women and their children and slashes a key overseas food aid program by about one-third below this year’s funding.” While these drastic cuts are morally indefensible on their own, the bill also contains massive cuts to the oil speculation watchdog – the Commodities Futures Trading Commission.

While experts agree that excessive speculation in the oil markets lead to higher gas prices, Rep. Jack Kingston of Georgia, the chairman of the House Rules Committee, simply dismissed the influence, and called debate about slashing CTFC funding a “red herring”:

What I suggest to you is that the discussion of the CFTC and oil speculators is a red herring. The real issue the Democrats failed to address is drilling for oil in order to increase supply.

Watch it:

But speculation’s role in rising gas prices is no secret, and it’s been proven time and time again that more drilling won’t help lower gas prices. In May 2011, the CFTC charged traders for artificially driving up the price of oil in 2008, and in April of this year, Goldman Sachs, the world’s largest commodity trader  admitted that speculation was to blame for high oil prices, telling its clients that speculation had added as much as $27 to the price of a barrel of oil . And during a Senate Financial Services Committee hearing, Rex Tillerson, the CEO of Exxon Mobil, said that if prices were reliant just on supply and demand, the price of a barrel of oil should be about $60 or $70 per barrel.

And while the CFTC has been tasked with cracking down on excessive commodities trading, they’ve got even more ground to cover.  The CFTC released data showing that hedge funds and speculators  “increased their positions in energy markets by 64 percent since June 2008 to the highest level on record.” And just last week, the CFTC reported that almost 90 percent of oil traders betting on rising prices are speculators, while just 12 percent of these bets were “held by producers, merchants, processors and users of the commodity.”

Despite this, the Republican’s House Agriculture spending bill, HR 2112, slashes funding for the CFTC by 44 percent from levels Obama requested.  The $172 million appropriated for the CFTC is also $30 million – 15 percent – less than 2011 levels. But this isn’t the first time the GOP has taken a stance against measures that would end gas price increases.  The House GOP already voted twice to slash funding to the CFTC. And as the Hill reported, these cuts to the CFTC “would significantly curtail the timely and effective implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.”