Reed and Levin Call for Federal Task Force to Curb Speculation that is Driving Up Energy Prices

WASHINGTON, DC -- With energy prices continuing to reach record highs, U.S. Senators Jack Reed (D-RI) and Carl Levin (D-MI) sent a letter to President Bush requesting the creation of a new federal task force to investigate whether speculators are driving up prices in energy commodity markets through manipulative or deceptive practices.

Reed and Levin requested that the President pull together high ranking officials, including the Secretary of the Treasury; the Chairman of the Securities and Exchange Commission (SEC); the Chairman of the Commodities Future Trading Commission (CFTC); the Chairman of the Federal Trade Commission (FTC); the Chairman of the Federal Energy Regulatory Commission (FERC); and the Attorney General to take a closer look at how the energy commodity markets are being manipulated and ferret out unscrupulous conduct in speculation.

“With the summer driving season quickly approaching, convening such a task force would not only send a strong signal to speculators, but would establish a coordinated and timely effort to protect consumers from skyrocketing energy prices. As such, we ask that the task force be convened and report its findings in no later than 60 days,” the senators wrote.

Experts suggest that up to 25% of the premium for petroleum products is a result of speculation and not supply and demand.

“The President should immediately begin to pull together a task force to take a thorough look at speculation,” said Reed. “We understand that the laws of supply and demand result in a market price, but if those principles are being undercut by unregulated speculation then we need to aggressively police that fraud and abuse. This task force will help prevent price manipulation and distortions that lead to inflated energy prices for U.S. consumers.”

“With rampant speculation pushing oil and gasoline prices to record levels, it is critical that we rid our energy markets of excessive speculation and price manipulation,” Senator Levin said. “The President must show more and stronger leadership in protecting American consumers and businesses from the harmful effects of speculation and manipulation.”

Senator Levin is the author of the Close the Enron Loophole Act (S. 2058), and Senator Reed is a cosponsor of the bill. Currently, the “Enron loophole” allows unregulated electronic commodities exchanges to operate with no oversight and outside of federal regulation. The Close the Enron Loophole Act would require greater transparency to protect the public from inflated energy prices and market manipulation.

The text of the letter follows:

The Honorable George W. Bush
President
The White House
Washington, DC 20500

Dear Mr. President:

As the price of oil and gasoline continues to soar to record highs, we are writing to request that urgent action be taken to adequately investigate whether speculators are driving up prices in energy commodity markets through manipulative or deceptive practices.

One step that we believe should be undertaken immediately is for you to convene a task force to examine and evaluate trading in these markets. This task force should be comprised of officials at the highest levels of government, including the Secretary of the Treasury, the Chairman of the Securities and Exchange Commission, the Chairman of the Commodities Future Trading Commission, the Chairman of the Federal Trade Commission, the Chairman of the Federal Energy Regulatory Commission, and the Attorney General.

With the summer driving season quickly approaching, convening such a task force would not only send a strong signal to speculators, but would establish a coordinated and timely effort to protect consumers from skyrocketing energy prices. As such, we ask that the task force be convened and report its findings in no later than 60 days.

As you know, in the wake of the subprime mortgage and housing crisis, investors have flocked to commodities markets as a safe hedge against inflation and as a short-term speculative investment. Given that speculators and lenders in the commodities markets include hedge funds, brokerage firms, commercial banks, and other large financial institutions, we need to ensure that this increase in volume and volatility is not the result of unlawful manipulative practices. It is also critical to determine whether regulatory oversight agencies have enough tools and resources to maintain accountability over trading in commodity markets. Indeed, it has been reported that economists now posit that speculation, not fundamentals, is the dominant factor currently controlling these markets.

We believe that our government has an obligation to assure the American public that energy costs are not the result of market manipulation. We look forward to hearing from you on this critical issue.

Sincerely,

Jack Reed
United States Senator

Carl Levin
United States Senator