Cantwell: "Shenanigans' in Oil Market Reminiscent of Enron "Nightmare' in Pacific NW

Press Release

In Floor Speech, Cantwell says $50 Million Oil Manipulation Case Shows Need for Immediate Action on Gas Prices

Today on the Senate floor, U.S. Sen. Maria Cantwell (D-WA) said the U.S. Commodity Futures Trading Commission (CFTC) should use its emergency authority to implement overdue rules today to rein in excessive speculation and help consumers save on high gas prices.

Cantwell praised the CFTC for filing charges Tuesday in a $50 million oil market manipulation case from 2008 -- but said the case showed the need for immediate CFTC action to rein in excessive speculation that is shifting the oil futures market and artificially driving up gas prices. Referencing Enron's blatant manipulation of Pacific Northwest electricity rates early last decade, Cantwell said similar tactics are now happening in the oil market, and they must be stopped.

"Energy is the lifeblood of any economy. We know in the Northwest, we saw this with Enron," Cantwell said in a floor speech Tuesday. "We have been through this nightmare. We are so appalled it seems like it is happening again now in the oil markets. It's the same shenanigans that happened in electricity, the same shenanigans in natural gas. Yes, the same shenanigans are happening in the oil market."

Cantwell said that to really make a difference on Main Street, the CFTC needs to implement new rules on speculative position limits that Congress authorized in the Wall Street Reform Bill last year and actually prevent illegal activity from occurring in the first place.

"Many people are starting what is soon going to be the summer driving season, and they are outraged at the price of gasoline. It is hurting our economy. People who have to commute to work every day, people whose businesses depend on reasonable fuel costs are getting gouged over these prices," Cantwell said. "We don't have to wait one more day. The Commodities [Futures Trading] Commission could be doing its job. … They can use their emergency authority. They can implement these rules today and help consumers save on high gas prices."

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Cantwell has long fought to prevent market manipulation and excessive speculation from artificially driving up the price of oil and prices faced by consumers at the pump. In recent months, she has called on the CFTC to not delay any further in implementing overdue rules on speculative position limits. The 2010 Wall Street Reform bill called for the CFTC to implement speculative position limits in energy markets within 180 days of enactment. The CFTC is more than four months late on its January 2011 deadline to take action, while consumers continue to pay high prices at the pump.

Also in recent months, Cantwell has demanded the Federal Trade Commission (FTC) investigate any links between rising gas prices and a sharp increase in wholesale oil markets. In August 2009, the FTC finalized its Petroleum Market Manipulation Rule, which was promulgated in compliance with legislation Cantwell authored in 2005 and successfully shepherded into law in 2007, making it a crime to manipulate wholesale oil markets. Her provision empowers the FTC to levy civil penalties of up to $1 million per day. She is now calling on the consumer protection agency to use its new authority to meet their responsibility to protect consumers.

During last year's financial market reform debate, Cantwell pushed for tough and effective rules and the elimination of loopholes to prevent speculators from manipulating the oil market. She fought to ensure that the bill required the CFTC to enact position limits to diminish, eliminate or prevent excessive speculation that disrupts the market. Mandatory speculative position limits, which the CFTC is in the process of setting now, and strong anti-manipulation tools were main contributors to Cantwell's eventual support of the Wall Street reform law.

Cantwell brought to the larger financial regulatory reform effort the knowledge she gained from a decade of fighting to protect Washington state ratepayers, including her historic battle to expose the ways Enron manipulated West Coast electricity markets to jack up prices. Using the lessons learned, Cantwell helped author provisions in the 2005 Energy Bill that made it a crime to manipulate electricity or natural gas markets. To date, the Federal Energy Regulatory Commission (FERC) has used the law to conduct 93 investigations resulting in 45 settlements and civil penalties of $122,230,000 and disgorgement of profits totaling $35,945,000. Cantwell also secured a provision in the Energy Policy Act of 2005 that prevented a bankruptcy court from forcing Snohomish Public Utility District (PUD) and its customers to pay millions of dollars in termination fees for electricity that was never delivered. This measure reaffirmed FERC's authority to decide whether charges related to manipulated power contracts could be deemed invalid.

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