|
|
PUMP ACT WOULD END SPECULATION ON THE OIL
FUTURES MARKET
As the price of crude oil hit $100
a barrel in futures trading on the New York Mercantile Exchange
last week, U.S Congressman Bart Stupak (D-Mich) renewed his
call for action on legislation he has introduced, which experts
estimate could lower the cost of oil by $20 to $30 a barrel.
H.R. 594, the Prevent
Unfair Manipulation of Prices (PUMP) Act would close the
so-called 'Enron loophole' and require dark-market energy trading to
subject to the same rules and government oversight as regulated
markets.
"As oil prices continue to climb,
families across the country are being hit hard by rising fuel
costs," Stupak said. "People don't mind paying a fair price for a
product, but a price that is being manipulated by speculators is not
fair. These high prices are more than just supply and demand."
According to AAA, gas prices
in Michigan are averaging $3.10 a gallon, 85 cents higher
than the same time last year. Some economists estimate that if oil
prices continue at this pace, consumers could see gas prices at
$3.60 to $4.00 a gallon as they head into the summer. An
economist quoted in the Jan. 3rd
Wall Street Journal noted that the price of gasoline increases
an average of 19 cents for every $10.00 increase in a barrel of oil.
"Oil prices are based on speculation
and fear, fueling greed and higher prices at the pump," Stupak said.
"It used to be that energy futures traders were individuals looking
to take delivery of the product. But thanks to the 'Enron loophole',
today the market is being gamed by hedge fund managers and
speculators looking to make a profit at the expense of hard-working
Americans."
While political turmoil in
oil-producing countries contributed to the price increase, Stupak
notes that trading on unregulated markets is also a significant
factor. The PUMP Act would reduce the effect unregulated speculation
has on energy prices. While it is difficult to determine the precise
impact speculators have on oil prices, in a Dec. 12, 2007 hearing of
the Oversight & Investigations Subcommittee that Stupak
chairs, it was estimated that the PUMP Act would reduce the price of
crude oil by as much as $20 to $30 a barrel.
"As much as half of energy trading
occurs without transparency and without oversight," he notes.
"Speculation and market manipulation in the energy futures market
can crate a snowball effect and consumers ultimately pay the price
when they are heating their home or putting gas in their car.
There are currently two types of oil
futures trading. Market trading takes place through the New York
Mercantile Exchange and is overseen through the Commodity Futures
Trading Commission. However, an increasing amount of oil futures
trading occurs 'over-the-counter'. This trading is difficult to
determine whether traders are basing their trades on market
realities or just gaming the markets to drive up prices.
|
|
|
|
||