Feb. 3, 2009
Congress Must Reregulate Energy Markets To Stop Wild Swings in Oil Prices
Speculators Are Responsible for Market Turmoil, Public Citizen Energy Director Tells House Committee
WASHINGTON, D.C. – Congress must reregulate the energy markets if it wants to prevent speculators from causing massive swings in oil, gasoline, natural gas, electricity and other energy prices, which hit $147 a barrel in July before dropping 75 percent in just five months, Tyson Slocum, director of Public Citizen’s Energy Program, told a U.S. House committee today.
The wild energy market fluctuations cannot be explained purely by supply and demand; rather they were the result of the speculative bubble bursting, triggered by the Wall Street financial crisis and the resulting tightening of the credit market, said Slocum, who appeared before the U.S. House Committee on Agriculture.
“If Congress does not move quickly to regulate the energy futures market, it’s only a matter of time before speculators once again exploit American consumers,” Slocum said. “Regulatory reforms to strengthen oversight over the nation’s energy trading markets are sorely needed to restore true competition to America’s oil and gas markets. And limiting the ability of speculators like Goldman Sachs and Morgan Stanley to control refineries, pipelines and storage facilities will reduce their ability to manipulate prices.”
Slocum urged Congress to take a two-pronged approach to stabilizing energy prices and bringing relief to consumers. Lawmakers should provide incentives to help families reduce their dependence on fossil fuels by providing them tax breaks to purchase hybrid vehicles, install solar panels and make energy-efficient improvements to their homes, and make mass transit more available, he said.
Second, Congress must restore transparency to the futures market, where energy prices are set. Stronger regulations over energy trading markets would reduce the level of speculation and limit the ability of commodity traders to engage in anti-competitive behavior that is contributing to the record high prices Americans have faced. This includes imposing firewalls to limit energy trading firms from speculating on insider information gleaned from their affiliates involved in the storage, transporting or processing of energy.