Grand Oil Party Protects Oil Speculators, Turns Back on American Consumers

Posted on by Karina

As American families and small businesses are getting pinched at the gas pump, House Republicans are protecting oil speculators by slashing funding for the agency tasked with policing price manipulation in the oil markets. The GOP proposal announced yesterday by the Appropriations Agriculture Subcommittee would cut funding for the Commodity Futures Trading Commission (CFTC) by 15% from 2010 levels and a whopping 44% from President Obama’s 2012 budget request. Think Progress:

…ExxonMobil CEO Rex Tillerson admitted earlier this month that, according to traditional supply and demand, oil should cost about $60 or $70 per barrel, instead of hovering around $100. Analysts at Goldman Sachs estimated that speculation was adding roughly $27 per barrel earlier this month. Instead of addressing this clear problem, House Republicans have proposed cutting the budget of the Commodity Futures Trading Commission — which oversees trading in energy markets — by 15 percent from its 2010 level:

The CFTC’s budget would fall to $172 million from $202 million under the plan to be considered tomorrow by the agriculture subcommittee of the House Appropriations Committee. It “provides the necessary resources” for the CFTC to fulfill its duties, Representative Jack Kingston, a Georgia Republican and subcommittee chairman, said in a statement. President Barack Obama had requested $308 million in his 2012 budget proposal.

Since 1990, speculators have more than doubled their share of the oil futures market. Back then, they composed roughly 30 percent of the market; they make up nearly 70 percent today. According to the CFTC, speculative positions in energy markets — oil and otherwise — are at an all-time high.

The GOP’s attempt to undermine the CFTC’s ability to protect consumers and small businesses comes as no surprise after Republican Majority Leader Eric Cantor’s stunning promise to oil speculators last week:

Cantor told the audience of speculators that his Republican caucus would “do our part” to block the implementation of financial reforms passed last year as part of the sweeping Dodd-Frank law. He even called out the Commodity Futures Trading Commission, the regulators in charge of overseeing derivatives and energy speculation, and promised to stop regulations from going online…

In fact, this isn’t the first time the GOP has tried to undermine the CFTC by slashing its funding. In February, the GOP ‘So Be It’ Spending Bill – which passed with near unanimous support from House Republicans – would have slashed investments in the CFTC by one-third.

Today, CNN Money reports that the CFTC, the agency House Republicans are attempting to undermine, charged five oil speculators with price manipulation:

Federal regulators charged five oil speculators Tuesday with manipulating the price of crude and making a $50 million profit from the scheme.

The Commodity Futures Trading Commission alleges the speculators bought enormous amounts of actual crude oil for sale in Cushing, Okla., during the early months of 2008.

This created a perceived shortage of oil in Cushing — a major point for oil delivery — and drove the price of oil futures contracts higher.

The speculators then bet the price of oil would fall by selling so-called “short” contracts to other investors. When the speculators sold their actual oil holdings in Cushing en mass, the price of oil did fall, netting the group a hefty profit.

The alleged scheme took place between January and April 2008, a time when oil prices were gradually climbing toward their all-time record of $147 a barrel set in the summer of 2008…

And just this week, Congressman Elijah Cummings, Ranking Member on the Oversight Committee, released a report finding “addressing excessive speculation offers the single most significant opportunity to reduce the price of gas for American consumers.”

While House Republicans reward those who are driving up the price at the pump, they continue to vote against providing relief to America’s taxpayers and consumers–this afternoon, they cast their 10th vote this year against real action to hold Big Oil accountable.

As @NancyPelosi tweeted today:

Oil speculators are driving up gas prices-#GOP answer is to give them more leeway & cut watchdog $:

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