'Wall Street Crude Oil Casino' Blasted By House Democrats (UPDATED)
WASHINGTON -- A cadre of top Democrats said Wednesday that heavy Wall Street speculation was driving up gas prices and blasted Republicans for pushing a new bill to delay any crackdown on such speculation until the end of 2012.
"What we have now on Wall Street is a crude oil casino, and it has been opened and is now being protected by the Republicans," said Rep. Ed Markey (D-Mass.) at a press conference that included Reps. Barney Frank (D-Mass.), Maxine Waters (D-Calif.), Joe Courtney (D-Conn.), Peter Welch (D-Vt.), Collin Peterson (D-Minn.) and Carolyn Maloney (D-N.Y.).
According to the Commodity Futures Trading Commission, the regulator which oversees speculation in the oil and food markets, the number of of speculative bets on oil is currently at an all-time high, above even the extreme levels associated with the 2008 run-up in oil prices, when oil hit its highest price ever.
All of that speculation has driven up the price of oil, according to many economists and an analyst at Goldman Sachs. Sean Cota of the Petroleum Marketers Association said at today's press conference that a "bubble is underway" in the oil markets and that excessive speculation costs consumers and retailers $400 billion a year.
Oil prices have risen sharply this year but have been increasingly volatile of late, plunging a full ten percent during a single trading session last week.
"There used to be a debate about whether or not speculation contributed to the price of oil," Frank said. "Now there's a consensus."
"We know this is having an impact," Peterson added, arguing Republicans "didn't learn a darn thing from the financial collapse."
Last year's financial reform bill requires the CFTC to impose new rules limiting excessive speculation in the oil and food markets, but the agency has been slow to act, and House Republicans are now pushing a new bill to delay those rules until the end of 2012.
Sen. Bernie Sanders (I-Vt.) sent a letter to President Barack Obama in April, urging him to demand action from the CFTC. Obama has formed an Oil and Gas Fraud Working Group to scrutinize fraudulent behavior that may be driving up prices at the pump, but has not spoken out about regulating speculative bets that are currently legal.
In addition to delaying rules on oil and gas trading, the House GOP bill would push back all of the derivatives reforms required by last year's Wall Street overhaul and repeal some aspects of a 1999 law requiring traders to register with the CFTC and the SEC.
Experts say heavy speculation becomes particularly dangerous when combined with "high-frequency trading," automated processes that execute thousands of trades in less than a second. "It's like the movie 'Wall Street' combined with 'The Terminator,' except it's a horror movie for the American consumer," Markey said, echoing concerns from CFTC Commissioner Bart Chilton.
During a May 4 House Agriculture Committee Hearing, Rep. Mike Conaway (R-Texas) said there was no evidence that speculation affects commodity prices. Rep. Frank Lucas (R-Okla.), author of the new GOP bill, was not immediately available for comment.
While Democrats target commodities speculation, Republicans blame pain at the pump on limited offshore drilling for oil and gas in the U.S. However, many experts claim expanded drilling operations simply will not lower gas prices.
Rep. Maxine Waters (D-Calif.) also criticized Republicans during Wednesday's press conference for attempting to repeal consumer protections included in last year's Wall Street overhaul, part of separate legislation aimed at watering down the powers of the new Consumer Financial Protection Bureau. Some Democrats, including Frank, have backed an effort to delay another part of the Wall Street reform bill targeting the swipe fees that banks charge retailers for processing debit cards.
UPDATE (2:19 p.m. EST): As lawmakers were holding their press conference, the Chicago Mercantile Exchange, one of two major exchanges trading crude oil futures, halted trading in crude, gasoline and heating oil contracts after gasoline futures plummeted by 25 cents per gallon, CME spokesman Chris Grams told HuffPost.
UPDATE (3:32 p.m. EST): A group of 17 senators sent a letter to the CFTC on Wednesday afternoon, demanding that the regulator combat excessive speculation as soon as possible. 15 Democrats, along with Sens. Susan Collins (R-Maine) and Bernie Sanders (I-Vt.), signed.