"PUMPed" about Energy Independence

By Courtney Ann Jackson-Talk Radio News Service

Energy independence is a must according to United States Representative Bart Stupak (D-Mich.) at his news conference Friday. Stupak introduced revised legislation of the Prevent Unfair Manipulation of Prices (PUMP) Act that will address excessive energy market speculation and regulation of any future carbon derivatives markets.

“We need the 2009 PUMP Act for two reasons. Number one, we’ve seen a dramatic increase in the price of oil and natural gas since the beginning of the year. Secondly, the carbon derivative trading market that’s being proposed...is creating a whole new market,” said Stupak.

The update and revised PUMP Act addresses more current carbon issues and gives the Commodity Futures Trading Commission (CFTC) the authority to regulate carbon derivates as an energy commodity. It will also aid in closing the swaps, involving energy transactions loophole, which will eliminate energy transactions to be excluded from the requirements of the Commodity Exchange Act.

Next week, the House Energy and Commerce Committee will consider the American Clean Energy and Security Act. The Act will create “an entirely new carbon derivatives market which speculators can manipulate,” according to Congressman Stupak’s office.

Stupak said the carbon derivatives market needs to be “based on a strong regulatory framework.” He also noted that despite the fact that energy costs are down significantly from this time last year, America can not become complacent.”

“I am tired of waiting. We should get it done. I don’t want to create a market and then try to fix the market once it’s functioning. Let’s fix it. Let’s get it frame worked before the market begins,” he said.

How to solve the oil problem: Do something about it

Witness Walter Lukken of the Commodity Futures Trading Commission (CFTC) testified before the House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies. Lukken tried to explain the multitude of issues contributing to rising oil, corn, and other commodity prices and what the CFTC is doing to address the problem.

At one point, Chairwoman DeLauro (D-Conn.) began to raise her voice in frustration. She said that CFTC, which is in charge of assessing the commodity price problem, should also be taking action, but nothing is being done.

It is the price of onions, not oil that has risen the most since 2006, Lukken said. Oil and corn prices have risen 100 and 300 percent respectively, but onion prices have gone up 400 percent since 2006. 70 percent of oil in the U.S. is imported, Rep. Marcy Kaptur (D-Ohio) said. Money is moving away from America and into other financial markets, Kaptur said.

When prompted by Rep. Ray Lahood (R-Ill.) to answer questions about rising oil prices in simpler terms, Lukken said, “We are consuming more than we are producing.” Rep. Jack Kingston (R-Ga.) asked Lukken if any oil suppliers were hoarding inventory. Lukken said there is no evidence of hoarding.

A number of representatives said they were confused about the terminology Lukken was using. Chairwoman DeLauro observed the confusion and said that the commodity market is complex and so the answers to rising oil prices and other commodities will also be complex.

Supply and demand still a law

The House Committee on Agriculture met to discuss the Commodity Futures Trading Commission (CFTC) and its role in monitoring oil prices. Rep. Jeff Moran (R-Kan.) said that speculation is a component of high oil prices but that speculation is being used as a scapegoat and preventing Congress from addressing other important issues.

Walter Lukken, acting chairman of the CFTC, said that the CFTC launched an investigation in December 2007 to monitor the oil prices, realizing that enforcement and regulation is imperative to the industry. According to Lukken, the CFTC has found that the cost of oil properly reflects supply and demand, adding that the CFTC is unable to find evidence supporting claims that speculation is driving up prices at the pump. Lukken said he welcomes evidence showing why oil prices should be lower than they currently are.

Lukken also said that the CFTC is able to monitor a complex market despite being understaffed. He stated that the CFTC has asked for $27 million dollars in order to increase its staff to historical levels. Lukken told the committee that the CFTC has seen an 8,000 percent increase in activity and will be unable to sustain itself without additional employees.

Lukken expressed support for the Farm Bill, saying that the CFTC is working to comply with it and asking Congress to allow its implementation before revising it. Lukken also said he is confident that the Farm Bill has closed the “Enron Loophole,” a loophole that allows for exchanges made electronically to circumvent US regulation.