Bernie Sanders Demands Action From Obama On Wall Street Oil 'Gambling'

Sen. Bernie Sanders (I-Vt.) demanded on Thursday that regulators impose limits on oil speculation to help lower the price of gas in a letter sent to President Obama.

“There is mounting evidence that the skyrocketing price of gas and oil has nothing to do with the fundamentals of supply and demand, and has everything to do with Wall Street firms that are artificially jacking up the price of oil in the energy futures markets,” Sanders wrote. “In other words, the same Wall Street speculators that caused the worst financial crisis since the 1930s through their greed, recklessness, and illegal behavior are ripping off the American people again by gambling that the price of oil and gas will continue to go up.”

Last year’s financial reform bill required the Commodities Futures Trading Commission to crack down on commodities speculation by imposing “position limits” -- a cap on the size of the bets that Wall Street traders can place. The agency was required to apply the new rules by January 22, but the CFTC has delayed the rules in order to collect data.

“What is particularly offensive is that this could and should have been prevented under current law,” Sanders wrote.

While at least part of the recent spike in oil prices is likely the result of unrest in the Middle East, the heavy volume of Wall Street speculation may be exaggerating the rise, if not driving it outright. The number of speculative bets on food and energy today is even higher than in 2008, when oil reached its highest price ever, sparking food riots across the globe. CFTC Commissioner Bart Chilton has been pushing to implement position limits soon, citing heated speculation and a March 21 research note from Goldman Sachs analyst David Greely that claimed Wall Street gambling in the futures markets is in fact driving up oil prices.

Obama announced a new inter-agency working group to combat fraud in the oil markets on April 21, but some economists and experts believe the effort will have a very limited impact on gas prices. Commodities speculation is perfectly legal, and traders do not have to break the law in order to drive up prices.

The full text of Sanders' letter is below:

April 28, 2011

The Honorable Barack Obama
President of the United States
The White House
1600 Pennsylvania Avenue, NW
Washington, DC 20500

Dear Mr. President:

As you know, the skyrocketing cost of gasoline is causing severe economic pain to millions of Americans who have already suffered through the worst economic crisis since the Great Depression.

In Vermont, where it is not uncommon for people to commute 100 miles to work and back five days a week, the increased price of gas is taking a serious bite out of the paychecks of middle class families, many of whom are already working longer hours for lower wages. We have a responsibility to do everything we can to lower gas prices so that they reflect the fundamentals of supply and demand and bring needed relief to the American people at the gas pump.

Let's be clear. There is mounting evidence that the skyrocketing price of gas and oil has nothing to do with the fundamentals of supply and demand, and has everything to do with Wall Street firms that are artificially jacking up the price of oil in the energy futures markets.

In other words, the same Wall Street speculators that caused the worst financial crisis since the 1930s through their greed, recklessness, and illegal behavior are ripping off the American people again by gambling that the price of oil and gas will continue to go up.

According to the Energy Information Administration, the supply of crude oil is higher today than it was last year when gas prices averaged $2.81 a gallon, while the demand for gasoline is lower today than it was last year. Based on supply and demand fundamentals, prices should be going down, not up. Instead, gas prices have gone up by over a dollar a gallon since last year.

According to Goldman Sachs, 20 percent of the price of crude oil is due to excessive speculation. Other experts believe that excessive speculation is driving up crude oil prices by 50 percent. This means that Americans are paying a Wall Street premium of between 70 cents and $1.63 a gallon every time they fill up their gas tanks.

This is simply unacceptable. What is particularly offensive is that this could and should have been prevented under current law.

The Wall Street Reform and Consumer Protection Act that you signed into law last summer required the Commodity Futures Trading Commission (CFTC) to impose strict position limits on the amount of oil that Wall Street speculators could trade in the energy futures market no later than January 22, 2011.

It is now April 28, 2011, and the CFTC has still not imposed speculation limits on oil trading in direct violation of both the letter and the spirit of the Wall Street reform law.

Since January 22, 2011, when these speculation limits were supposed to go into effect, until today the national average for a gallon of gas has gone up by more than 80 cents a gallon.

Instead of putting strong speculation limits in place in January of 2011 as required by law, the CFTC proposed a rule on position limits that wouldn't go into effect until late January of next year. Adding insult to injury, these position limits are so ineffective that they would allow just one Wall Street firm to control 25% of the entire U.S. crude oil spot market or four firms to control 100% of this market without violating the regulations.

Three out of the five commissioners at the CFTC must vote to approve strong oil speculation limits before they can take effect. It is clear right now that there are only two commissioners who are willing and able to do what the law requires to significantly limit oil speculation and bring down gas prices at the pump.

I urge you to make it clear to the CFTC that they must obey the law and establish strong oil speculation limits as soon as possible. I would also urge you to ask for the immediate resignation of any CFTC commissioner who refuses to obey the law and nominate someone else who will.

We cannot allow Wall Street speculators to rip off the American people at the gas pump for one more day and the American people cannot wait another eight months to go by before any limits on Wall Street oil speculators go into effect.

Thank you for your attention to this important matter. I look forward to working with you on this issue.

Sincerely,

Bernard Sanders

United States Senator

Comments

[waduvall]

11:28 AM on 05/12/2011

OK, tell me: where was Mr Sanders when these same speculators drove the price of oil down to $35 a barrel just over two years ago? Traders make just as much with the price going from $100 to $80 as they do when it goes from $80 to $100. As long as you're on the right side of the trade. But now they want to limit the downward momentum that is happening now. Just plain stupid.

[Sup Dooder]

10:36 PM on 05/06/2011

Put Wall Street in jail. Pleeeease.

[somebody whatabout]

09:37 PM on 05/06/2011

Sanders pleas will be ignored and the rape of our Nation will continue until a rebellion is conceived to put an end to the culture of greed and dishonesty.

[somebody whatabout]

09:35 PM on 05/06/2011

CFTC stands for the rights of the price fixers and speculators who contribute dollars and influence to many of the Politicians and Legislators. The Government is a den of thieves and crooked fakes who only care about lining their pockets.

[glassbender]

12:26 PM on 05/05/2011

Guess what, we're EXPORTING the krap, there is NO oil shortage, it's ALL WALLSTREET of thieves.

[AmandaLacasse]

03:11 PM on 05/03/2011

Senator Sanders is one of the few politicians in favor of eliminating the $4 billion in taxpayer subsidies the U.S. government hands out each year. Just one part of the puzzle, certainly, but a good place to start!

[JaxReader]

05:59 PM on 05/05/2011

Actually the house democrats tried to get that passed to take away subsidies from oil companies two or three times this year. The house republicans refused and voted it down.

[lightdata]

03:12 PM on 05/02/2011

I agree with Senator Sanders but there is one very big elephant in the room, the U.S. dollar. Since the price of oil is tied to the dollar when it loses value it makes oil more expensive for us as consumers. Here is a handy chart that shows the devaluing of the dollar
http://www.x-rates.com/d/EUR/USD/graph120.html
Thanks Ben at the fed for making it even harder on the American public. I know some will say it is not his fault since the fed now has to buy American debt but what the heck got to blame someone.

[Finnegans Wake]

03:54 PM on 05/03/2011

The devaluation of the dollar affects the price of gas about as much as supply and demand. These wild swings upward are purely speculator-driven. In other words, they are rising much faster than any casuation by devaluation of the dollar.

[schnauzergirl]

12:24 PM on 05/02/2011

Well since speculators are in other countries as well, changing our laws or putting restrictions on those here, isn't really going to do anything to the overall market prices. The oil companies don't set the prices of crude and neither do the producing countries. Even OPEC doesn't set the price.

From OPECs site:
"One of the most common misconceptions about OPEC is that the Organization is responsible for setting crude oil prices. Although OPEC did in fact set crude oil prices from the early 1970s to the mid-1980s, this is no longer the case. It is true that OPEC's Member Countries do voluntary restrain their crude oil production in order to stabilize the oil market and avoid harmful and unnecessary price fluctuations, but this is not the same thing as setting prices.

In today's complex global markets, the price of crude oil is set by movements on the three major international petroleum exchanges, all of which have their own Web sites featuring information about oil prices. They are the New York Mercantile Exchange (NYMEX, http://www.nymex.com), the International Petroleum Exchange in London (IPE, http://www.ipe.uk.com) and the Singapore International Monetary Exchange (SIMEX, http://www.simex.com.sg)."

[Finnegans Wake]

04:10 PM on 05/03/2011

If regulation of the NYMEX traders would result in lower crude prices, wouldn't the other exchanges be forced to follow suit or lose investors who would buy from the lowest exchange?

[MANOFCOMMONSENSE]

10:19 PM on 05/01/2011

I agree with Bernie.........The world wide market has many price differences... The oil companies could be more fair about this if they wanted too... But Greed talks$$$$$$$$$$$$$$$$$$$$$$

[muck-raker]

08:35 AM on 05/02/2011

F&F Today the Corporations and Bankers are in control. look at the past. As soon as the Glass-Steagal act was removed the big moneyed players took the market to the mat...did they reinstall the GS act? Nah
Today Wall street dominated our commodities doubling the prices of our foods iln less than a year. Did our legislators come to our aid and stop Naked Shorting? Nah
Today our legislators are too busy counting their bribe money...Money talks
Naked shorting” refers to “shorting” a stock for sale without first borrowing it.[1] When one sells short a non-borrowed stock, one is selling something that one does not possess. The risk that one may not be able to then acquire the shares needed to deliver on the sale is a contributing factor to the controversy surrounding this practice.

Short selling is legal.

It gets much criticism because it makes you face infinite risk. Normally when you invest, the most you can lose is the value of your investment. In short-selling, it can be a lot more. i.e. if you short a stock at $1 and it goes up in value to $5, you owe the full $5.

It also gets ridiculed because people do not like the idea of being able to bet against the government. however, other might argue that it is a necessary market force which keeps prices efficient.

[MANOFCOMMONSENSE]

08:23 AM on 05/03/2011

Lesson taken........... Thanks

[schnauzergirl]

12:26 PM on 05/02/2011

The oil companies do not set crude oil prices.

[MANOFCOMMONSENSE]

08:23 AM on 05/03/2011

Nobody holds a gun to their head when the drill in the Gulf and Alaska and such...They can market any price even lower when we give them these oil leases

[blackranger]

03:57 PM on 05/01/2011

We need to add our voice to Sanders, he is letting us know just what law is not being upheld. So much for "no regulation" advocates. They are most likely the same ones who are complaining about the price of gas. Follow the Law, it was hard enough to get the darned thing passed and it was watered down by plenty of lobbyiest influence.

[unionave]

07:33 PM on 05/01/2011

Sanders is a US Senator and therefore has the ear of the President . So the question is : why did Sanders write a letter to the President instead of calling him to voice his concerns ? Then make the letter public ? Is this what friends do to each other ?

[blackranger]

10:45 AM on 05/02/2011

Only by making the real problems public can our congress and president hope to put enough pressure on the situation to make anything happen. We are a part of the problem, with our lack of support for those who are at least trying. We need to back the guys in congress, letters, emails, calls. The lobbyiests are doing this daily, we need to add our voices to the mix.

[last man standing]

12:11 PM on 05/01/2011

I find it to be ironic that so many people complain about high prices for fuel.

The enemy is always “Big Oil’, Wall Street, Republicans, Teaparty ya ya ya ya . Well since oil is traded in dollars do you think the constant devaluing of the dollar has anything to do with high prices?

Progressives like Sanders believe that oil companies' profits of 4% on a gallon of gas are obscene, but the federal government taxing the same gallon of gas at 18% isn't. Progressives are all right with states, counties and even some towns adding taxes on fuel to the tune of as much as 42% in some places.

It was reported today that the governor of Maryland (a democrat) wants to add more taxes to Gas in his state. Bernie Sanders NEVER seen a tax that he didn’t like! He never voted against a new tax to finance another government handout program.

Remember the “Cash for Clunkers” give away government program. Was it even suggested that people who participated purchase a fuel efficient car or truck
Speaking of Gas Hogs, have you ever notice when you go to fuel your car or truck almost all of the vehicles being fueled are huge vehicles that get very low MPG.

No we don’t want to do any of that! We just want to do what we have always done, and if it’s inconvenient or not to our likening we will blame everyone else.

[Lock Piatt]

12:49 PM on 05/01/2011

Identified domestic oil reserves are higher now than twenty years ago. Germany and south Africa have used liquid coal so yes we can make fuel out of coal which means we have a few hundred years of that if we need it. The entire oil shortage in the USA on and offshore is contrived by environmentalists and Socialist/Progressives that want to re-distribute the wealth of America to the third world nations.

America has the ability to fuel itself and not export our wealth or fight wars in the ME to defend oil for Europe - let them fend on their own. Europe will switch to nuclear in a heart beat if America stops the military support for the OPEC nations. Europe will not fight just as is being proved in Libya - Obama had to give them drones as their planes could not use accurate bombs. So, Obama's war will continue to grow.

[last man standing]

01:49 PM on 05/01/2011

Amen
Bush and the republican­s wanted to develop our own natural resources so we wouldn’t be held hostage by people and government­s that hate us.

The Democratic congress said no in 2008. So here we are AGAIN, sucking wind and paying $112 a barrel for oil. Maybe we could put a windmill, sail or solar panel on our cars and trucks to get around.

[Dr Phibes]

09:26 AM on 05/02/2011

So you advocate nationalizing the oil industry in the United States? Good to know.

[blackranger]

03:58 PM on 05/01/2011

What part of wall street interference in the market do you just not understand?

[last man standing]

12:17 PM on 05/02/2011

What don’t I understand about Wall Street interference?

What don’t you understand about free trade?

You or anybody else can by commodities on a free and open market.

When the fed prints money and floods the international community with dollars the value of the dollar falls.

Since the price of a barrel is traded in dollars everytime the value of the dollar decreases the price of commodities go up. Politicians, mainly Obama and the democrats don’t want the American people to know that their irresponsible spending is what is causing all the pain people are experiencing not only at the pump but everywhere else like food, clothes and just about everything we need a day to day basis.

“Obama and the democrats added more to national debt in First 19 Months of his presidency than all presidents from Washington through Reagan Combined, Says Gov’t Data “

Don’t you wonder about Bernanke’s policy of quantitative easing, monetizing of debt, (Which means the government prints money and purchases treasury notes back from banks because they can sell them to anyone).

The feds have played this little trick twice already with 600 billion dollars (1,2 trillion in all) and on April 28th. Bernanke said he is ready to do it again if conditions warrant

You want to see a real eye opener go to www.usdebtclock.org ! Run your curser over the numbers for an explanation Top right is the debt time machine (projects future years green circle. Red circle years past).

[Roadrun]

11:25 AM on 05/01/2011

While gas prices are a real problem to citizens of states they are a very good thing to said states where gas taxes are a percentage of the price per gallon. It's hard to get support from governors to lower those prices. At least it helps keep some schools open, I think.

[Roadrun]

11:35 AM on 05/01/2011

And that list is:

"The states with additional percentage-based gas taxes on gas are California, Connecticut, Georgia, Hawaii, Illinois, Indiana, Michigan, New York and Virginia."

[sej100]

12:03 AM on 05/01/2011

Bernie Sanders, the ONE DECENT MAN IN WASHINGTON!!!!

RIGHT ON BERNIE

[Kathy Bingham]

11:53 PM on 04/30/2011

I think we have oil reserves here in Texas and other states.So lets get busy.
Tell the pharoahs to let the reserves open up and quit robbing the people
rich and poor.

[blackranger]

03:59 PM on 05/01/2011

understand this has nothing to do with supply and demand, it is speculation, profit for a chosen few who would willingly inflate the prices for their pockets. Enough already

[muck-raker]

08:42 AM on 05/02/2011

It was just found last year huge reserves of OIL shale in Montana, N. & S. Dakota....what did we do? we sold or leased huge tracts of land to CANADA. well maybe they will still sell us the gasoline

[andrew fogelson]

07:40 PM on 04/30/2011

how wonderful. someone with some kind of conscience and intelligence points out to the...uh...president of these united states what the rest of us have understand from the outset. Senator Sanders is to be commended; those, starting with the President, who have hidden from this issue should be shamed of themselves.