Press Release of Senator Cantwell

WASHINGTON, D.C. – Today, U.S. Senator Maria Cantwell (D-WA) called claims by Commodities Futures Trading Commissioner Walter Lukken fatally flawed when he said during a House Agriculture Committee hearing that there is no strong evidence that speculators are driving up oil commodity prices. In a new report issued today, the CFTC said, it was not able to “quantify the amount of speculative trading occurring in the futures markets.” However, since July 7, 2008, when Congress began debating steps it would take to curb oil speculation, prices began to fall, resulting in $6.7 billion in savings at the pump for American consumers. 

 

Yesterday, Cantwell joined Senator Byron Dorgan (D-ND) and Representatives Bart Stupak (D-MI) and Rosa DeLauro (D-CT) to renew their efforts to crack down on irresponsibleoil speculators, raising questions about speculators’ outsized influence over the energy futures market, the cost of energy, and perhaps even the federal agency responsible for regulating them. The Senators and Representatives pointed to a new independent report that outlines how speculators drove oil prices to record levels this summer, and then suddenly switched their position and “began a mass stampede for the exits” starting on July 15. Issued by Michael W. Masters of Masters Capital Management and Adam K. White of White Knight Research & Trading, the report uses data from the CFTC, the Energy Information Administration, and investment sources to show how speculators, not supply and demand or a weak dollar, was the leading cause for record energy prices.

 

In August, a report was issued by McCullough Research of Portland, OR showing that the dramatic rise in oil prices in June, and the subsequent fall in price in July, can't be explained by any of the fundamentals of supply and demand. Instead, it could be a result of the trading strategies of major market players. Cantwell and McCullough said new data collection tools are needed so that federal agencies can identify the culprits and stop any market manipulation.

 

“The CFTC report notes that long positions in NYMEX oil declined 11 percent in the first six months of 2008,” said Robert McCullough a former investigator who exposed Enron’s market manipulation.  “They fail to note that the net positions of speculators actually fell 100 percent – from 100,000,000 barrels of oil, or $9,000,000,000 at the beginning of the year, to zero barrels of oil in mid-July.  Since the price of oil peaked in early July, this indicates that speculators gradually sold out their positions while the market was rising and avoided the 40 percent precipitous price decline since mid July.  Once they left the market, prices fell dramatically.  This is exactly the same pattern Enron's manipulations showed in 2000-2001; rising prices during periods of intense speculator activity, and falling prices once the normal forces of supply and demand are allowed to operate.  The CFTC's report misses the fundamental issue by restricting their analysis to periods before the July 2008 price spike. When the bandit leaves the bank, the money leaves with him.”

 

On June 23, Cantwell introduced the Prevent Unfair Manipulation of Prices (PUMP) Act which takes a comprehensive approach to address the loopholes that allow energy traders to evade federal oversight. 

 

In April, she called on the Department of Justice to create an Oil and Gas Market Fraud Task Force to examine fraud and manipulation of oil and gas markets.  Cantwell has repeatedly called on federal agencies including the Federal Trade Commission and the Commodities Futures Trading Commission to use their existing authority to conduct oversight over the oil and gas markets.  Earlier that month, Cantwell chaired a landmark Senate Commerce Committee hearing which served to highlight many of the oil futures market loopholes.

 

Cantwell continues to place a hold on the nominations of CFTC Commissioners Lukken, O’Malia, and Chilton.

 

 

 

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