CNBC "Power Lunch" - Transcript

Interview

MS. CARUSO-CABRERA: All week long, including today, members of Congress holding hearings trying to get to the bottom of why oil prices have jumped so sharply.

Who is to blame? What's to blame? Particularly, they've been focusing on speculators. Is that the reason while oil prices are higher?

Joining us now is Senator Maria Cantwell. She's a member of the Energy and Natural Resources Committee.

Senator, thanks for being here.

SEN. CANTWELL: Thank you, Michelle.

MS. CARUSO-CABRERA: So you've heard testimony all this week from various experts and market participants. What do you think is the answer to why oil prices have jumped so sharply this year?

SEN. CANTWELL: Well, we heard from various economists and analysts that, yes, there are lots of different issues impacting the price of oil, but to have good functioning markets, you ought to have transparency and right now, we have some exchanges operating here in the United States that don't have the same transparency as NYMEX or CME and a lot of those individuals were calling for such regulation.

MS. CARUSO-CABRERA: And if you do that kind of regulation, what would that do to the price of oil in your opinion?

SEN. CANTWELL: Well, I think, when you have a tight supply, you want to make sure even more so that nothing is being done to affect that supply in a manipulative way, and I think what you would have with transparency and rules like speculation limits is the ability for regulators to see any kind of untoward activity that is happening in the market.

MS. CARUSO-CABRERA: But if you do that, will that bring down the price of oil?

SEN. CANTWELL: Well, I think there's a lot of people that think that it would bring down the price because this excessive speculation that is unregulated and is operating on dark markets is driving up the price. Now, some of those people have estimated anywhere from 30 or 40 percent it might drive it down, but my point is that you should just have transparency. It works for NYMEX. It works for CME. It should be the same rule for any exchange operating in the United States.

MS. CARUSO-CABRERA: You're not concerned about pushing all that trading overseas, to other markets where it will be even less transparent?

SEN. CANTWELL: No. Because you're talking about west Texas oil, a product produced in this country, traded on U.S. computers and it should have the same regulations.

We do have current laws on the books for us to go to any foreign market and prosecute anyone who is doing anything untoward that affects the price in U.S. markets.

So we already have that statutory ability. But what you want to have is good transparency, the ability to know who is trading to make sure that there are position limits and to make sure somebody isn't coming like in Ameren and doing something untoward in the market, or even worse, like what Enron did.

MS. CARUSO-CABRERA: Didn't the market take care of Ameren? Ameren lost a ton of money. Their investors lost a ton of money and that was it. There was no need for regulation; they're gone.

SEN. CANTWELL: And consumers lost a lot of money. So we don't want to find the next Ameren. We want to make sure that it doesn't happen. And when you have the Commodities Future Trading Commission doing its job on these dark markets, they can come in. What happened in this case is Ameren was trading on NYMEX. They were told by NYMEX to reduce their position limits. Instead of doing that, they just went to this dark market and continued the same activities until they blew up.

MS. CARUSO-CABRERA: And they pay for it.

SEN. CANTWELL: A lot of people paid for it, just like we did in the West Coast with the western energy crisis and Enron. It cost my consumers billions of dollars.

So it hurts everybody. It hurts the markets. It hurts businesses. It hurts consumers. And so that's why good transparency -- to make sure that the markets are fully transparent is very important.

MS. CARUSO-CABRERA: But do you give any credence when Dan Yergin comes to you and says, you know what, China is buying 20,000 cars a day and they're consuming so much more every single day, that's why oil prices are moving higher? Do you give any credence to that argument?

SEN. CANTWELL: Oh, there's lots of reasons why we are in tight oil supply, and the United States needs to diversify off of oil and onto other products. We're fighting right now in the United States Senate to try to get renewable energy tax credits so we might be able to reduce the demand by natural gas on our electricity, on our electricity grid by 12 percent.

So we're pushing today to try to get that focus on wind and solar and some of those things that would help us diversify.

MS. CARUSO-CABRERA: We subsidize solar $24 per megawatt. We've done that for decades, and yet, solar, wind, clean coal, they're less than one percent of our energy needs, I mean, if we've been subsidizing solar for $24 per megawatt and it's still not supplying energy, what's going to do it?

SEN. CANTWELL: It is supplying energy. And you've had big oil people like T. Boone Pickens on, saying, you know, listen, if you want to move to the future, go to wind, go to some of these other renewables.

So you have people in the industry, but we are still subsidizing oil even at $136 a barrel, we are subsidizing oil and there are few of us here that think that we should take the subsidies that go to oil and instead transfer those to these renewables.

MS. CARUSO-CABRERA: Senator, thanks so much for your time. We appreciate it.

SEN. CANTWELL: Thank you.

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