S. 3268, the Stop Excessive Energy Speculation Act of 2008

[Guest Nevada Senator Harry Reid]

On July 15, 2008, Senators Reid, Durbin, Schumer, Dorgan, and Murray introduced S. 3268, the Stop Excessive Energy Speculation Act of 2008. This legislation, developed after consultation with consumer advocates, oil market analysts, and experts from the financial and airline industries, seeks to reduce the amount of excessive speculation in the oil markets. Specifically, the legislation would increase the resources and authority needed by the Commodities Futures Trading Commission (CFTC) to detect, prevent, and punish price manipulation and excessive speculation and give the CFTC emergency authority needed to rapidly implement the legislation. S. 3268 would also strengthen the amount and quality of information available to the CFTC so that the Commission can better regulate all aspects of the energy futures markets.

 

Reid spoke at a Senate Energy Committee workshop organized to examine why oil and motor fuel prices are so high and what can be done about them. "We all know that that bill is only a small down payment on the transformation that must take place, if we are going to meet the urgent economic, national security and global warming challenges that we can't afford to ignore any longer," said Reid at the workshop.

 

In addition, the Stop Excessive Energy Speculation Act of 2008 would provide better transparency in the trading of energy derivatives by closing the "London Loophole" so that oil traders using a foreign exchange cannot manipulate the price of oil in the United States. Finally, the legislation would require the CFTC to implement position limits to restrict excessive speculation that would still allow for reasonable trading for price discovery, liquidity, and legitimate hedging purposes.

 

Major Provisions

 

Speculative limits and transparency of offshore trading. This section would close the "London loophole" by treating oil traders using a foreign exchange as if they were trading in the U.S. for regulatory purposes, in order to stop traders from manipulating prices and speculating excessively by routing oil trades away from U.S.-based exchanges.

 

Working group on international regulators. This section would require the CFTC to convene a working group made up of international regulators to develop uniform reporting and regulatory standards so that excessive speculation will not harm consumers, national economies, and energy futures markets

 

Elimination of manipulation and excessive speculation as a cause of high oil, gas, and energy prices. This section would require the CFTC to eliminate excessive speculation while protecting and promoting legitimate hedge fund trading by adding a new definition of "legitimate hedge trading" to "trading by commercial producers and purchasers of actual physical petroleum and energy commodities for future delivery and the direct counterparties to such trades (regardless of whether the counterparties are commercial producers or purchasers)." Additionally, the section would require the CFTC to impose by rule reasonable speculative position limits on trading that is not legitimate hedge trading.

 

Large over-the-counter transactions. This section would give the CFTC the authority to begin collecting data on large over-the-counter traders so that it has the data necessary to determine whether price manipulation or excessive speculation is taking place. S. 3268 would also require the CFTC to prepare a report on each person who enters into a "covered over-the-counter transaction."

 

Index traders and swap dealers. This section would require that the CFTC routinely collect detailed information from index traders and swap dealers, and be able to distinguish between the two. Finally, the bill would require a review of the CFTC's trading practices to ensure that index traders are not adversely impacting the price discovery process.

 

Disaggregation of index funds and other data in energy markets. This section would require the CFTC to release data each month on the number and value of index funds in the energy markets as well as data on the speculative positions of those index funds in relation to normal market hedgers.

 

Additional CFTC employees. This section would authorize the CFTC to hire at least 100 full-time employees so the Commission can improve and increase its regulation and enforcement of the energy derivatives markets.

 

Working group on energy markets. This section would create a new interagency Working Group on Energy Markets, to be chaired by the Secretary of Energy. Other members include the Secretary of Treasury, Chairman of FERC, the CFTC, the FTC, the SEC and the EIA Administrator. The purposes of the Working Group would include: investigating the effects of speculation on energy commodities and prices critical to the energy security of the United States; recommending to the President and Congress laws and regulations necessary to prevent excessive speculation in energy commodities; coordinating the federal response to energy emergencies; and reviewing energy security considerations relevant to developments in international energy markets.

 

Study of regulatory framework for energy markets. This section would direct the Working Group on Energy Markets to conduct a study and report back to Congress within one year on the role of speculation in petroleum prices, and on any regulatory gaps that exist among relevant federal agencies that might hinder the effective oversight of markets critical to the energy security of the United States.

 

Collection and analysis of information on energy commodities. This section would amend the DOE Organization Act, to require federal agencies that provide the EIA Administrator with information necessary to identify energy-producing companies. In addition, the legislation would direct EIA to collect on a weekly basis more complete information on company-specific ownership of oil and natural gas volumes, and storage and transportation capacity owned or leased. For energy commodities physically delivered in the United States, it also would require any entity holding or controlling energy futures or swap contracts above an amount specified by the Secretary to file monthly reports with EIA detailing the quantity of physical stocks owned, physical purchase and sales agreements, and storage capacity owned or leased. Finally, the legislation would create within EIA a new Financial Market Analysis Office.

 

National natural gas market investigation. This section would direct Federal Energy Regulatory Commission (FERC) to undertake a study of the role of financial institutions on natural gas markets, including: trends in investment in storage and pipeline capacity; factors contributing to potential effects on wholesale natural gas prices; the character and number of related financial positions; and any international considerations the Commission deems relevant. The legislation also would reaffirm that federal agencies must cooperate with the FERC sharing data FERC the Commission deemed relevant to the investigation.

 

Legislative History

 

Senators Reid, Durbin, Schumer, Dorgan, and Murray introduced S. 3268 on July 15, 2008.

 

Expected Amendments

 

The DPC will release information on amendments as it becomes available.

 

Administration Position

 

At the time of publication, the Bush Administration had not released a Statement of Administration Policy on the Stop Excessive Speculation Act of 2008.

[Guest Dissident Voice]

Why is there not outrage over the fact that Americans must pay drastically more to feed their families, fuel their cars, and heat their homes?

[Guest jesselee]

Democratic Senators, Energy Experts Discuss Bill To End Excessive Oil Speculation And Lower Record-High Gas Prices

 

Washington, DC—Democratic Senators Byron Dorgan and Amy Klobuchar held a press conference today with energy experts to discuss the Stop Excessive Energy Speculation Act, which will stop greedy energy traders who artificially inflate oil prices and ensure Americans pay a fair price at the pump.

 

“The price of gas and oil continues to shoot up like a Roman candle,” Dorgan said. “It has become abundantly clear that speculators, not the laws of supply and demand, are driving up prices. This legislation will cut out the rampant speculation that is happening in the oil futures market.”

 

Said Klobuchar, noting that the price of gas has gone up $1 in just the past six months: “The experts tell us that a good amount of the money we now pay at the pump is going into the bank accounts of financial speculators, when I was a prosecutor we had a saying: ‘Follow the money and you’ll find the bad guy.’ If we’re going to protect American consumers and businesses, we need to follow the money and stop the speculators.’’

 

“Petroleum marketers want to be able to respond to the needs of their customers to provide affordable gas and diesel, and heating oil dealers desperately need to be able to provide affordable heating oil to their customers,” Sherri Cabrera, Director of Legislative Affairs for the Petroleum Marketers Association of America, said. “Reducing speculation is something that can be done immediately. Other solutions are important, but long term. Petroleum marketers are focused on reducing prices now. If S. 3268 is not enacted, not only will the economy continue to suffer, but this extreme energy crisis could well cost human lives this winter. Gas station owners and heating fuel retailers are fighting to lower fuel prices by urging Senators to pass S. 3268. Consumers who want lower gas prices should also tell their Senators to pass S. 3268.”

 

Said Mark Cooper, Director of Research for the Consumer Federation of America: “The housing crisis continues to be the greatest risk to the economy and the prospects for all American families, not just those directly affected. Neighbors and communities a half mile away are affected by each foreclosure and the impacts can last as long as five years. As home values decline, college dreams, new business hopes, retirement savings and rainy day funds disappear overnight. The Senate bill will reduce the risk of a serious overcorrection and help stabilize home values in many communities around the country.”

[Guest jesselee]

Democratic Senators, Energy Experts Discuss Bill To End Excessive Oil Speculation And Lower Record-High Gas Prices

 

Washington, DC—Democratic Senators Byron Dorgan and Amy Klobuchar held a press conference today with energy experts to discuss the Stop Excessive Energy Speculation Act, which will stop greedy energy traders who artificially inflate oil prices and ensure Americans pay a fair price at the pump.

 

“The price of gas and oil continues to shoot up like a Roman candle,” Dorgan said. “It has become abundantly clear that speculators, not the laws of supply and demand, are driving up prices. This legislation will cut out the rampant speculation that is happening in the oil futures market.”

 

Said Klobuchar, noting that the price of gas has gone up $1 in just the past six months: “The experts tell us that a good amount of the money we now pay at the pump is going into the bank accounts of financial speculators, when I was a prosecutor we had a saying: ‘Follow the money and you’ll find the bad guy.’ If we’re going to protect American consumers and businesses, we need to follow the money and stop the speculators.’’

 

“Petroleum marketers want to be able to respond to the needs of their customers to provide affordable gas and diesel, and heating oil dealers desperately need to be able to provide affordable heating oil to their customers,” Sherri Cabrera, Director of Legislative Affairs for the Petroleum Marketers Association of America, said. “Reducing speculation is something that can be done immediately. Other solutions are important, but long term. Petroleum marketers are focused on reducing prices now. If S. 3268 is not enacted, not only will the economy continue to suffer, but this extreme energy crisis could well cost human lives this winter. Gas station owners and heating fuel retailers are fighting to lower fuel prices by urging Senators to pass S. 3268. Consumers who want lower gas prices should also tell their Senators to pass S. 3268.”

 

Said Mark Cooper, Director of Research for the Consumer Federation of America: “The housing crisis continues to be the greatest risk to the economy and the prospects for all American families, not just those directly affected. Neighbors and communities a half mile away are affected by each foreclosure and the impacts can last as long as five years. As home values decline, college dreams, new business hopes, retirement savings and rainy day funds disappear overnight. The Senate bill will reduce the risk of a serious overcorrection and help stabilize home values in many communities around the country.”

[Guest Jesselee]

Reid: Republicans Run Away From Yet Another Opportunity To Lower Record-High Gas Prices

 

Washington, DC—Senate Majority Leader Harry Reid made the following statement today after Republicans blocked a bill to stop excessive speculation by Wall Street traders, rejecting another Democratic effort to address the energy crisis:

 

“Republicans once again have run away from an opportunity to provide a short-term solution to our energy crisis. While Democrats have worked to stop greedy speculators who artificially inflate oil prices, Republicans have chosen to protect them.

 

“There is widespread agreement that excessive speculation is contributing to high energy prices, and that curbing it would help lower gas prices right away. But Bush-McCain Republicans would rather talk endlessly about the problem than act to solve it. It is unclear what ideas Republicans actually have to solve this energy crisis; even when given the opportunity to vote on amendments to increase domestic production, they say no.

 

“I still hold out hope that we might be able to move some bills in the coming weeks that can actually help consumers in the short term – including releasing oil from the Strategic Petroleum Reserve, LIHEAP and other measures. At the same time, we will continue working toward reducing demand and developing clean and affordable alternatives in the long term to wean us off our addiction to oil.”

[Guest LAW_*]

Here is actually went on. The bill has stalled.

 

STOP EXCESSIVE ENERGY SPECULATION ACT OF 2008 -- (Senate - July 23, 2008)

 

 

[Page: S7129] GPO's PDF

--- The PRESIDING OFFICER. All time has expired.

 

The question is on agreeing to the motion to proceed.

 

The motion was agreed to.

 

The PRESIDING OFFICER. The clerk will report the bill.

 

The legislative clerk read as follows:

 

 

A bill (S. 3268) to amend the Commodity Exchange Act, to prevent excessive price speculation with respect to energy commodities, and for other purposes.

 

 

The PRESIDING OFFICER. The majority leader.

 

AMENDMENT NO. 5098

 

Mr. REID. Mr. President, I have an amendment at the desk, and I ask for its consideration at this time.

 

The PRESIDING OFFICER. The clerk will report the amendment.

 

The legislative clerk read as follows:

 

 

The Senator from Nevada [Mr. Reid] proposes an amendment numbered 5098.

 

 

Mr. REID. Mr. President, I ask unanimous consent that further reading of the amendment be waived.

 

The PRESIDING OFFICER. Without objection, it is so ordered.

 

The amendment is as follows:

 

 

The provisions of this bill shall become effective 5 days after enactment.

 

 

Mr. REID. Mr. President, I ask for the yeas and nays.

 

The PRESIDING OFFICER. Is there a sufficient second? There appears to be a sufficient second.

 

AMENDMENT NO. 5099 TO AMENDMENT NO. 5098

 

Mr. REID. Mr. President, I have a second-degree amendment at the desk, and I ask that it be reported.

 

The PRESIDING OFFICER. The clerk will report the amendment.

 

The legislative clerk read as follows:

 

 

The Senator from Nevada [Mr. Reid] proposes an amendment numbered 5099 to amendment No. 5098.

 

 

Mr. REID. Mr. President, I ask unanimous consent that further reading of the amendment be waived.

 

The PRESIDING OFFICER. Without objection, it is so ordered.

 

The amendment is as follows:

 

 

In the amendment, strike ``5'' and insert ``4''.

 

 

Mr. REID. Mr. President, it seems that the Republicans have two tools in their obstruction and delay kit. It is a tool kit that has worked quite well for them. First, they prevent the Senate from getting to bills. The Republican leader uses this tool when he can convince enough of his caucus to kill legislation before the Senate debate even begins.

 

Second, when a bill is so popular that the Republican leader is unable to convince enough of his colleagues to kill it before debate can begin, he switches to his second tool--claiming the process is unfair. That is what we have before us today.

 

The Republican leader requests an unlimited or virtually unlimited number of amendments on which he is unable or unwilling to provide specifics. When these requests are not accepted in their entirety, as the Republican leader knows they cannot be, he then turns to his caucus and asks them to oppose any further action on the bill.

 

Regardless of which tool the minority leader uses, the result is the same. The Republicans refuse to let us address the most critical priorities of the American people.

 

[Page: S7130] GPO's PDF This situation reminds me of a story I learned as a young lawyer that has now become somewhat legendary, which says: If you have the facts, you pound the facts. If you have the law, you pound the law. If you have neither, you pound the table.

 

That is exactly what is happening today and has happened on many other occasions. Unfortunately, it has happened, Mr. President, a record number of times this session--84 filibusters. That is obstruction at its zenith.

 

Republicans would love to muddy the issue by claiming that the Democratic majority won't let them be heard, but that is simply not the truth. Democrats have proposed a comprehensive plan to address our energy crisis, starting with speculation. The Republicans, if they do not like our speculation legislation, let them offer something to the contrary. The Republicans have been talking about their plan for weeks and weeks now. That plan is to drill, to drill, and to drill.

 

Now, both parties want more drilling. It is not something that simply the Republicans want. We Democrats believe that increasing domestic production is certainly a big part of the problem, and we should do something about it. But, Mr. President, realistically--and we all know this--realistically we have a situation where we have, counting ANWR and all the offshore oil, less than 3 percent of the oil in the world. We use more than 25 percent of the world's oil every day. So we can't produce our way out of the problem. We can certainly increase domestic production, and we should do that, and we have a comprehensive plan to do that.

 

Our approach is different from theirs on drilling. We believe our approach is more responsible because we basically force the oil companies to take a look at the land and do an inventory of it and tell us why they are not using certain pieces of land. That is 68 million acres in addition to about 25 million acres in Alaska that are available with the signing of the President's pen. That increases it up to, as you know, about 90 million acres.

 

We have offered our plan to the Republicans. They say they want to drill. They have talked about what their drilling plan is, and we have said: Let's have a vote on it. But they have said no. They can't take yes for an answer. So it is very clear. The only conclusion the American people can reach from this is that the Republicans would rather talk than act. They would rather score, in their own minds, some kind of political points with the oil companies than accomplish something for the American people.

 

The Republican leadership has refused our offer of votes on drilling, so I am going to now, Mr. President, file cloture on this piece of legislation before us--the speculation legislation. I think it is very important that we do that, and it is important for a number of reasons.

 

I should mention that one of the things they refuse to take yes for an answer on is their drilling proposal. But I am confident the American people are seeing what the Republicans are doing, and have been doing, for 18 months--talking and talking about drilling and then running for the exits when we give them a vote on what they have asked to do.

 

I am equally confident, when given a choice of who to send to Congress, the American people will choose to send people who want to get things done and not those who seek delay, obstruction, and the failed ways of the past.

 

Mr. President, I suggest the absence of a quorum.

 

The PRESIDING OFFICER. The clerk will call the roll.

 

The legislative clerk proceeded to call the roll.

 

Mr. REID. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

 

The PRESIDING OFFICER. Without objection, it is so ordered.

 

CLOTURE MOTION

 

Mr. REID. Mr. President, I apologize to everyone. I wanted to make sure I hadn't missed anything in my script.

 

I now send a cloture motion to the desk.

 

The PRESIDING OFFICER. The cloture motion having been presented under rule XXII, the Chair directs the clerk to read the cloture motion.

 

The legislative clerk read as follows:

 

Cloture Motion

 

We, the undersigned Senators, in accordance with the provisions of rule XXII of the Standing Rules of the Senate, hereby move to bring to a close debate on S. 3268, the Stop Excessive Energy Speculation Act of 2008.

Harry Reid, Richard Durbin, Barbara A. Mikulski, Frank R. Lautenberg, Christopher J. Dodd, Byron L. Dorgan, Bernard Sanders, Patty Murray, Benjamin L. Cardin, Dianne Feinstein, Amy Klobuchar, Robert P. Casey, Jr., Ron Wyden, Ken Salazar, Bill Nelson, Debbie Stabenow, Daniel K. Inouye, Sherrod Brown.

 

 

The PRESIDING OFFICER. By unanimous consent, the mandatory quorum call has been waived.

 

MOTION TO COMMIT

 

Mr. REID. Mr. President, I move to commit the bill to agricultural committee with instructions to report back forthwith, with an amendment.

 

The PRESIDING OFFICER. The clerk will report the motion.

 

The legislative clerk read as follows:

 

 

The Senator from Nevada [Mr. Reid] moves to commit the bill (S. 3268) to the Committee on Agriculture, Nutrition and Forestry with instructions to report back forthwith, with an amendment numbered 5100.

 

 

The amendment is as follows:

 

At the end, insert the following:

 

This title shall become effective 3 days after enactment of the bill.

 

 

Mr. REID. I ask for the yeas and nays.

 

The PRESIDING OFFICER. Is there a sufficient second?

 

There appears to be a sufficient second.

 

The yeas and nays were ordered.

 

AMENDMENT NO. 5101

 

Mr. REID. I have an amendment to the instruction at the desk. I ask now for its consideration.

 

The PRESIDING OFFICER. The clerk will report.

 

The legislative clerk read as follows:

 

 

The Senator from Nevada [Mr. Reid] proposes an amendment numbered 5101, to the instructions of the motion to commit.

 

 

Mr. REID. I ask unanimous consent the reading of the amendment be dispensed with.

 

The PRESIDING OFFICER. Without objection, it is so ordered.

 

The amendment is as follows:

 

 

In the amendment, strike ``3'' and insert ``2''.

 

 

Mr. REID. I ask for the yeas and nays.

 

The PRESIDING OFFICER. Is there a sufficient second? There appears to be a sufficient second.

 

The yeas and nays were ordered.

 

AMENDMENT NO. 5102 TO AMENDMENT NO. 5101

 

Mr. REID. I now have a seconddegree amendment at the desk. I ask the clerk to report the amendment.

 

The PRESIDING OFFICER. The clerk will report.

 

The legislative clerk read as follows:

 

 

The Senator from Nevada [Mr. Reid] proposes an amendment numbered 5102 to amendment No. 5101.

 

 

Mr. REID. I ask unanimous consent the reading of the amendment be dispensed with.

 

The PRESIDING OFFICER. Without objection, it is so ordered.

 

The amendment is as follows:

 

 

In the amendment, strike ``2'' and insert ``1''.

[Guest Matthew Miller]

Republican Senator John Sununu voted against a bill to lower gas prices by curbing excessive speculation in energy markets. Experts have noted that speculation is driving up the price of a barrel of oil, and a recent House committee report revealed that speculators – institutional investors buying contracts with no intention of taking delivery of oil – now account for 73% of all trading of crude oil contracts on the New York Mercantile Exchange, up from 37% in 2000.

 

 

“John Sununu had an opportunity to lower the price of gas today, but instead he voted with the speculators who are profiting from Granite Staters’ pain at the pump,” DSCC spokesman Matthew Miller said. “John Sununu’s constituents deserve better than a politician who sides with Wall Street speculators over New Hampshire families.”

 

Sununu voted against legislation to guard against price manipulation just one day after the Commodity Futures Trading Commission announced its first case against a trading fund in the agency’s probe of crude oil market manipulation. The bill will eliminate so-called “dark markets” to increase transparency and accountability in commodities trading, strengthen the CFTC’s enforcement capacity, and close the “London Loophole” so all U.S.-based trading of American commodities is subject to American regulation.

Speculation is driving rising oil prices past where they should be, even with flat supply and rising demand. Economists and energy experts believe that speculation is helping drive the sudden spike in oil prices, which rose more than 50% between February and June. [Mark Zandi, Chief Economist, Moody’s Economy.com, on PBS Online Newshour, 6/6/08; Testimony of Gerry Ramm, Petroleum Marketers Association of America, before Senate Committee on Commerce, Science and Transportation, 6/3/08; McClatchy, Interview of Michael Greenberger, 6/17/08; Energy Information Administration, 7/23/08]

 

 

Even Big Oil thinks their product should be selling for less than half the price. The CEO of Royal Dutch Shell has said that the market fundamentals are the same as when oil sold at $60 per barrel, and an ExxonMobil executive testified in April that the price of oil should be $50 to $55. [Washington Post, 4/11/08; Senate Judiciary Committee, 4/1/08]

 

Current law leaves oil markets vulnerable to manipulation. The legislation closes loopholes written by Republican lawmakers and the Bush CFTC that allow vast amounts of trading in crude oil futures takes place in the shadows. As Walter Lukken, Acting Chairman of the Commodity Futures Trading Commission, conceded, crude oil markets are “ripe for those wanting to illegally manipulate the markets.” [CNBC, 06/17/08]

 

Futures markets have become playgrounds for big investors, rather than vehicles to buy and sell oil. Speculators – institutional investors buying contracts with no intention of taking delivery of oil – now account for 73% of all trading of crude oil contracts on the New York Mercantile Exchange, up from 37% in 2000, according to a House committee report. [Wall Street Journal, 1/23/08]