Statements on Introduced Bills and Joint Resolutions

Floor Speech

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - June 12, 2008)

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By Mr. DURBIN (for himself, Mr. Reid, Mr. Levin, Mr. Bingaman, Mr. Dorgan, Mrs. Feinstein, Ms. Klobuchar, Mr. Menendez, Mr. Brown, Mr. Casey, Mr. Kerry, Mr. Leahy, Mrs. Murray, Ms. Mikulski, Mr. Obama, and Mr. Reed):

S. 3130. A bill to provide energy price relief by authorizing greater resources and authority for the Commodity Futures Trading Commission, and for other purposes; to the Committee on Agriculture, Nutrition, and Forestry.

Mr. DURBIN. Mr. President, I came to the floor at the beginning of this week to make a simple point: as oil prices have reached $139 per barrel in recent days, the truth is that no one--not the oil industry, not the futures exchanges, not the regulators, not even this United States Senator--knows exactly what's going on here.

But with the economy in a tailspin and with the average price for a gallon of gas surpassing $4 and even higher across the country, it is time to find out.

The chairman of the chief regulator of the futures markets, the Commodity Futures Trading Commission, doesn't seem to know either. In a recent appropriations subcommittee hearing I chaired, Chairman Lukken stated that ``CFTC staff analysis indicates that the current higher futures prices are generally not a result of manipulative forces.''

Yet last Thursday and Friday the futures price of a barrel of oil shot up $16. In 2 days. Unless there was a massive pipeline explosion late last week that I somehow missed, there is simply no supply or demand justification for that kind of price increase.

Something more is going on here.

Is it rampant speculation that is causing the rise in oil prices?

Is it illegal market manipulation?

Is it the fact that the stock markets are not providing investors with decent returns at the moment, and so big investors are now pouring money into the futures markets instead?

Is it the hugely deflated dollar exchange rate that is behind this?

Is it that investors are worried about inflation and are using oil to hedge against that risk like they use to use gold?

Is it really the rising demand of emerging economies like China and India that is causing the price of oil to rise?

Is it the lack of true oversight into these markets that has encouraged institutional traders to take large speculative positions through overseas markets or over-the-counter trades, positions that they can't take in other markets?

Is it the lack of portfolio caps that are in place for some futures contracts but not for oil that has encouraged institutional traders to take large speculative positions?

The questions go on and on. And the answers are scarce. Given the importance of the price of gas to families in Illinois and across the country, I think that is scandalous.

That's why I'm introducing a bill today entitled the ``Increasing Transparency and Accountability in Oil Prices Act.'' This bill would provide more people and better technology to the CFTC to help them better understand this situation. It also would give the CFTC far greater visibility to the traders and the transactions that are involved here.

Specifically, this bill would:

Authorize the CFTC to hire an additional 100 FTEs, and express the Sense of the Senate for the need for an emergency supplemental request from the President for this funding;

Close the ``London loophole'' by treating oil traders located in London as if they were trading in the U.S. for regulatory purposes, so that the CFTC has access to oil trades on all exchanges rather than just the trades that take place physically in the U.S.;

Require more detailed reporting to the CFTC for index funds and swap dealers who typically take long positions that might drive up the price of oil;

Move the CFTC Inspector General out of the CFTC Chairman's office, to ensure its objectivity; and

Initiate a GAO study of the existing international regulatory regime that should be preventing excessive speculation and manipulation of oil prices.

Many of these ideas are not new. Senators Levin, Feinstein, Cantwell, and Dorgan have all been very active on these issues as have many others, and of course Chairman Bingaman and Chairman Harkin have been leaders on these regulatory issues for years.

For my part, I intend to use my Chairmanship of the Appropriations Subcommittee on Financial Services and General Government to increase the funding and capacity of the CFTC. We will expect the agency to use these resources to get to the bottom of this.

Quickly.

These ideas--more regulatory resources and more market transparency--are ideas that many of my colleagues might agree with. I encourage my colleagues on both sides of the aisle to support this important legislation.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

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