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FOR IMMEDIATE RELEASE May 2, 2008 |
Contact:
Senator Levin's Office Phone: 202.224.6221 |
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Farm Bill Conference Report Includes Feinstein-Levin-Snowe Measure to Close the “Enron Loophole” |
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Measure would increase transparency in oil and natural gas markets and limit excessive speculation |
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Washington, DC – U.S. Senators Dianne Feinstein (D-Calif.), Carl Levin (D-Mich.) and Olympia Snowe (R-Maine) today announced that the Farm Bill conference report includes a measure they have sponsored to close the so-called “Enron Loophole.” Since 2000, the “Enron Loophole” has exempted electronic energy markets for large traders from government oversight. Specifically, the measure would increase federal oversight authority to detect and prevent manipulation and to limit speculation in U.S. electronic energy markets. It would increase transparency, and create an audit trail, impose firm speculation limits, and impose stiffsignificantly increase financial penalties for cases of market manipulation and excessive speculation. The measure was approved as part of the CFTC Reauthorization Act of 2008, which is a title in the Farm Bill that conferees closed late last night. The overall Farm Bill conference report still needs to be finalized, and will ultimately need to be sent to the House and Senate for an up-or-down vote of approval, and then will require the President’s signature before it can become law. “A major step has been taken toward closing the Enron Loophole once and for all,” Senator Feinstein said. “This bill puts all significant energy trades on electronic platforms within the regulatory confines of the CFTC and will impose limits on the size of trader’s positions to prevent excessive speculation. It also ensures that there is an audit trail and, imposing imposes recording keeping requirements, and forces electronic exchanges to monitor trading behavior and prevent manipulation. This is especially important given that the price of oil has hit a record high of $120 per barrel and gas prices have reached $4 per gallon in many parts of California. And natural gas prices are at an average of $12 per thousand cubic feet, roughly twice as high as they were 10 years ago. Experts believe that speculation may be to blame. This has been a long fight. It began following the Western Energy Prices, when electricity cost California consumers nearly $40 billion. In 2003, I offered an amendment to close the Enron Loophole that received 44 votes. So, nearly eight years later, I’m hopeful that this legislation could go a long way toward preventing the next energy crisis.” Senator Levin said: “With energy prices defying the laws of supply on and demand, it is imperative that we put the cop back on the beat in our energy markets. This legislation will restore the CFTC’s authority to detect and prevent manipulation and excessive speculation in the energy markets. I urge the Congress to quickly pass the Conference Agreement so the CFTC can immediately get to work to protect American consumers and business from manipulation and excessive speculation.” “Truckers, families, and seniors across America are struggling to cope with the record high prices at the pump. At a time when the price of oil reaches new highs every week, it is imperative that the Congress act expeditiously to ensure there is a “cop on the beat” to prevent price manipulation and other abuse,” Senator Snowe said. “It is clear that traders are rushing into the oil futures markets and it absolutely critical that we ensure that these transactions are transparent and consistent with the fundamentals of futures trading. This amendment will reflect that futures’ trading is out of control and the CFTC needs commensurate powers to adapt to the growth of the Wild West of Wall Street.” Bill Summary
Since 2000, there has been a tremendous growth in the trading of oil and gas futures on unregulated, electronic markets. The lack of oversight in these markets led to billions of dollars of losses:
The U.S. Senate Permanent Subcommittee on Investigations, chaired by Senator Levin, held hearings and issued reports in 2006 and 2007 establishing the need for increased government oversight of unregulated U.S. energy markets. In October 2007, the Government Accountability Office issued a report, Trends in Energy Derivatives Markets Raise Questions about CFTC’s Oversight, which concluded that non-commercial participants, including hedge funds, had increased participation in the exempt commercial markets. According to GAO’s analysis of data, the notional amounts outstanding of OTC commodity derivatives grew by 854 percent since 2003. |