Letter to the Honorable Gary Gensler, Chairman of the U.S. Commodity Futures Trading Commission

Letter

At a busy gas station, U.S. Senator Amy Klobuchar announced that she is asking the U.S. Commodity Futures Trading Commission to respond to high gas prices by acting immediately to limit excessive price speculation in the oil markets.

Klobuchar serves on the Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission.

In a letter sent today, Klobuchar urged Commission Chairman Gary Gensler to move forward with rules to restrict the size of speculative investments in oil and other commodities.

She noted that, in response to record high gas prices in 2008, Congress included provisions in the Wall Street reform legislation authorizing the Commission to rein in excessive speculation by hedge funds, investment banks and other financial entities.

However, the Commission has not yet adopted rules, called "position limits," to restrict purely speculative contracts in oil futures. These rules would reduce price volatility by helping to ensure that supply-and-demand market factors, rather than financial manipulation by non-oil traders, determine gas prices for consumers.

"When we saw oil prices rise to record levels in 2008, I said we needed a cop on the beat to protect American families and businesses from artificially high gas prices created by excessive speculation," said Klobuchar. "Now is the time to make sure the cop is on the job, vigilant and armed with the authority to enforce fair rules in the marketplace."

According to MinnesotaGasPrices.com, the average price for a gallon of gas in Minnesota is currently $3.54 and as high as $3.89. The average price has jumped 50 cents since the beginning of the year and nearly one dollar since last summer. With the peak summer driving season still months away, experts forecast that gas prices will continue to climb.
Klobuchar said it is estimated that every penny per gallon increase in gas or diesel prices translates into an extra $1 billion in annual costs for American consumers.
"High gas prices affect consumers at the pump, and they increase costs for farmers and businesses, large and small," said Klobuchar. "For airlines like Delta and Sun Country, the high fuel prices hurt them, too."
Klobuchar is a leader in Congress on forward-looking policies for energy security and independence. Last week, she and Sen. Tim Johnson (D-SD) introduced comprehensive energy legislation -- the Securing America's Future with Energy and Sustainable Technologies (SAFEST) Act. The legislation would establish strong renewable energy and energy-efficiency standards, along with incentives for developing biofuels, biofuels infrastructure and advanced vehicle technologies.

Joining Klobuchar at today's news conference were Bob Krogman of the Minnesota Petroleum Marketers Association and Steve Williams of "Bobby & Steve's Auto World."

Full text of the letter:

March 14, 2011

The Honorable Gary Gensler
Chairman
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581

Dear Chairman Gensler,

I write today to ask that you move swiftly to implement position limits for the commodities markets as directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act. With oil prices at their highest level since September of 2008, it is imperative that we do everything in our power to ensure that the energy markets are operating efficiently and free from distortion.

In the last few months we have seen ominous signs of a repeat of the winter of 2008 when gas prices started to rise and continued their upward climb throughout the summer. Rising prices mean more than just higher costs for consumers at the pump. Businesses across this country struggling to fight their way out of the recession are taking another hit to their bottom line.

While speculation alone cannot be blamed for the rising price of oil, excessive speculation can contribute to volatility in the market and periodic spikes in price. It was for this reason that Congress directed the Commodity Futures Trading Commission, through the Dodd-Frank Act, to "establish limits on the amount of position, as appropriate, other than bona fide hedge positions, that may be held by any person." It was our intent that meaningful restrictions be put in place on the size of speculative investments in oil and other commodities.

I appreciate the difficult work the Commission has done thus far, but ask that you move forward without further delay in establishing strong position limits that will protect families, farmers and businesses who bear the brunt of rising oil prices.

Sincerely,

Amy Klobuchar
United States Senator

Cc: The Honorable Michael Dunn, The Honorable Jill E. Sommers
The Honorable Bart Chilton, The Honorable Scott D. O'Malia

Source