WASHINGTON -- With gas prices soaring, 45 Senate Democrats signed a letter on Tuesday urging GOP leaders to abandon their proposed cuts to the budget for a key regulator that oversees the food and energy markets, part of a broader effort to reduce government spending.
The letter, sent to Senate Minority Leader Mitch McConnell (R-Ky.) and House Speaker John Boehner (R-Ohio) on Tuesday, argued that Republicans should protect funding for the Commodity Futures Trading Commission, which would be cut by one-third under a defeated House GOP plan.
"The CFTC serves as an important 'cop on the beat,' working to protect American consumers by cracking down on manipulation and other market abuses that can drive up oil prices," the letter reads. "At a time where gas prices are rising and squeezing American families, we have a responsibility to provide our watchdogs the resources they need to fulfill their important oversight and regulatory responsibilities."
For their part, Republican leaders say the responsibility for rising gas prices rests with the Obama administration, which put a freeze on some offshore wells last year following the disastrous oil spill in the Gulf of Mexico. Boehner spokesman Michael Steel dismissed the letter from Senate Democrats as an attempt to divert the blame for the price of oil.
"This is just another attempt to distract from Washington Democrats' irresponsible opposition to increased American energy production, which would lower gas prices, reduce our dependence on foreign energy, and create American jobs," Steel told HuffPost. "American families know talk is cheap but gas is not -- and the Democrats who run Washington have no plan to help."
House and Senate leaders have struggled to reach an agreement on government funding for the remainder of the fiscal year, partly because of riders lumped in with the funding bill that would block money for Planned Parenthood, last year's health care law, the Environmental Protection Agency and consumer financial protection. The two chambers must compromise before a current stopgap measure expires on April 8.
The House Republican bill, which the Senate voted down on March 9, would require the CFTC to lay off about a third of its staff.
Some economists and consumer advocates are concerned that aggressive Wall Street speculation in energy markets is helping to drive up the price of food and gas around the world. "So long as you have money available to banks at zero cost, no long-term productive outlets for investment, and the capacity to make money by manipulating commodity pools, the situation is ripe for speculative excess," University of Texas economist James Galbraith told HuffPost last month.
Oil prices have been soaring in recent months, eclipsing $100 a barrel, which has sent the price of gas to over $3.50 a gallon and nearly $4 in California.
A report prepared for the April meeting of the Group of 20 leading world economies by the Organization of Economic Cooperation and Development attributes rising prices primarily to increases in real demand, rather than financial speculation.
Yet the increase in prices has also tracked speculation's rise, prompting the U.N.'s Food and Agriculture Organization to cite "growing linkage with outside markets, in particular the impact of 'financialization' on futures markets" as a "root cause" of food price volatility in a September meeting. According to CFTC Commissioner Bart Chilton, the number of Wall Street bets on energy prices has increased by 64 percent since June of 2008, when heavy speculation helped push oil prices near $150 a barrel, driving gas near $5 a gallon.
The CFTC has long overseen a small part of these markets, with roughly $5 trillion a year in trading. But under the Dodd-Frank financial reform bill signed into law by President Barack Obama, the agency is now responsible for policing a $500 trillion industry. CFTC Chairman Gary Gensler has said regulators will be unable to implement reforms without a significant increase in funding.
The Obama administration has proposed boosting the CFTC's annual budget by 77 percent, from $168.8 million to $298.8 million. That number is small relative to other major regulators -- The Securities and Exchange Commission, another key monitor of Wall Street trading, received $1.12 billion last year.
In February, Sen. John Boozman (R-Ark.) told HuffPost that speculation in commodities markets was a "legitimate concern," arguing that it not only affected energy prices, but food prices as well. "The reality is, as commodity prices go up, there's only a finite amount for food aid and things. People really are going to start dying," Boozman said.
As for Obama's drilling policies, the president defended his record on drilling earlier this month, stating during a press conference that domestic oil production is at a seven-year high and the administration is willing to dip into oil reserves if necessary.
Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources committee, likewise defended Obama during a floor speech last week. He said energy experts have dismissed claims that the administration's drilling policies led to higher gas prices, arguing uncertainty in the Middle East is a more likely culprit.
"First, we need to enable further expansion of our renewable fuel industry, which is currently facing infrastructure and financing constraints," Bingaman said. "Second, we need to move forward the timeline for market penetration of electric vehicles. Finally, we need to make sure we use natural gas vehicles in as many applications as make sense based on that technology."
Democrats have made oil prices a key talking point during negotiations over the budget, arguing that Republican measures weaken efforts to expand alternative fuel sources. The House GOP budget cut funding for energy efficiency and renewable energy by $786 million from current levels and reduced the Department of Energy's loan guarantee budget by $250 million.
"We find it equally troubling that your preferred budget would cut billions of dollars in investments in critical programs focused on developing new alternative fuels and clean energy technologies, undermining our competitiveness and increasing our trade deficit with oil producing nations," Democrats wrote in the letter. "We urge you to reverse these policies that will only set our nation backward, and put America's independence from foreign oil even further out of reach."
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