Senators Call for CFTC to Curb Abusive Oil Speculation, Impose Position Limits
(Washington, DC) – Four Senators called this week for immediate action to crack down on oil speculators through specific measures that the Commodities Futures Trading Commission has a legal duty to impose. Senators Richard Blumenthal (D-CT), Bernie Sanders (I-VT), Bill Nelson (D-FL) and Ron Wyden (D-OR) this week sent a letter to Chairman Gary Gensler and all five commissioners of the Commodity Futures Trading Commission (CFTC), calling on the CFTC to use the authority granted it under the landmark Dodd-Frank financial reform bill, which was signed into law one year ago last week. The Senators called on the CFTC to impose spot-month position limits in order to rein in gas prices that are plaguing families in Connecticut and across the country. Connecticut currently has the highest gas prices in the continental United States – higher than $4 per gallon and nearly a dollar higher than they were in July of last year.
This week, oil companies announced high profit numbers for the second quarter as gas prices remain high. Royal Dutch Shell announced net profits of $8.66 billion, close to double that of the company’s profits of $4.39 billion one year ago. Additionally, Exxon announced a 41 percent increase in their profits during the second quarter ($10.68 billion) and BP took in $5.3 billion despite the Deepwater Horizon disaster and an 11% in reduced production. BP credited high gas prices for their ability to remain profitable even with reduced production.
The Wall Street Reform and Consumer Protection Act of 2010, also known as the Dodd-Frank Bill, outlined statutory deadlines for the CFTC to act on certain provisions regarding position limits in order to cap the number of futures contracts that one investor can hold on one commodity. The statutory deadlines passed more than six months ago.
“Especially during a fragile economic recovery, our nation cannot afford to have speculators driving up prices at the pump,” the Senators write in the letter. “The Commodity Futures Trading Commission has the authority and responsibility to restrain such speculation and protect consumers, businesses, and our economy. One highly important power is to set position limits in energy commodities, which stop one investor from buying futures contracts in amounts that cause unwarranted price increases from excessive speculation… [w]e request that the CFTC act immediately to impose such limits, pending its enactment of a rulemaking imposing limits as required by the Dodd-Frank Act.”
In the letter, the Senators call on the CFTC to use its ability to impose spot-month position limits immediately. The agency has the data available to it to set these limits, where they would have the greatest impact on reining in manipulation.
The full text of the letter follows:
Mr. Gary Gensler
Chairman
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
Dear Chairman Gensler:
We are writing to urge implementation of speculative position limits as soon as possible pursuant to the Wall Street Reform and Consumer Protection Act of 2010. As you know, astronomical gas price increases over the past year have been crushing to American families and damaging to the economy.
Especially during a fragile economic recovery, our nation cannot afford to have speculators driving up prices at the pump. The Commodity Futures Trading Commission has the authority and responsibility to restrain such speculation and protect consumers, businesses, and our economy. One highly important power is to set position limits in energy commodities, which stop one investor from buying futures contracts in amounts that cause unwarranted price increases from excessive speculation.?? As you are well aware, the statutory deadlines enacted in the Wall Street Reform and Consumer Protection Act have long since passed – more than six months ago – for the Commodity Futures Trading Commission to act on important provisions regarding position limits. While we understand the challenges, we are dismayed that the Commission has failed to take any action whatsoever to fulfill its obligation and use its authority to impose position limits to the fullest extent possible at this time. For example, the agency could impose position limits in the spot month in on-exchange positions and on swaps transactions for which you have data, based upon a percentage of the deliverable supply. We request that the CFTC act immediately to impose such limits, pending its enactment of a rulemaking imposing limits as required by the Dodd-Frank Act.
Imposition of limits in the spot month, at the very least, will help to address excessive speculation in these critically important markets, and protect American consumers and taxpayers. Thank you for your prompt attention to this request.
Sincerely,
Senator Richard Blumenthal
Senator Bernie Sanders
Senator Bill Nelson
Senator Ron Wyden
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