Democrats press regulators on oil trades

Published: Mar 5, 2012 11:35 a.m. ET




WASHINGTON (MarketWatch) -- Democrats are urging the Obama administration to take swift action to reduce speculative trading in the oil markets as crude prices hover around $107 a barrel and gasoline climbs to about $3.80 a gallon.

In a letter to the Commodity Futures Trading Commission on Monday, nearly 70 House and Senate lawmakers pressed the commission to enforce caps on speculative trading adopted in October under the Dodd-Frank financial reform law. The lawmakers said in their letter that it was irresponsible to delay enforcement in light of rising energy costs.

"We have a responsibility to ensure that the price of oil is no longer allowed to be driven up by the same Wall Street speculators who caused the devastating recession that working families are now experiencing," said the lawmakers, led by Sen. Bernie Sanders (I., Vt.), a vocal critic of speculative trading in the oil markets.

"We look forward to responding to the letter from Sen. Sanders," CFTC spokesman David Gary said.

The lawmakers' rebuke to the CFTC is part of a time-honored tradition in Washington, whereby lawmakers and lobbyists push harder for long-held energy goals when oil prices rise. Democrats renew calls for limits on speculative trading, investments in clean energy projects and a repeal of tax breaks for big oil companies. Republicans, meanwhile, press for more domestic drilling and have started recently to call for approval of the Keystone XL oil pipeline.

Facing high gas prices during a re-election campaign, President Barack Obama has downplayed the need and effectiveness of short-term solutions. During recent speeches on energy policy, Obama has conveyed the idea that oil prices are determined by global forces that develop over several years.

The role of speculative traders in the oil markets has been debated for several years. In 2008, when crude prices spiked to $147 a barrel, lawmakers said Wall Street traders were inflating the prices for their own personal gain. Some energy experts counter that speculative traders have no real impact on global energy prices.

Position limits on speculative trading were passed by the CFTC in October, but enforcement has been delayed because of lingering questions over swaps, a complex financial instrument.

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