The Day- Courtney: Energy Trading Needs Oversight

Bill Would Rein In Speculators In Futures Markets Blamed For Run-Up In Oil Prices

U.S. Rep. Joe Courtney on Wednesday urged congressional support for legislation that would tighten regulation over energy-futures trading, which he said is being manipulated by savvy investors reaping huge profits from soaring oil prices.

The Second District congressman said he is joining forces with Michigan Congressman Bart Stupak to co-sponsor legislation in January called the Prevent Unfair Manipulation of Prices act that would extend regulatory oversight over all trading of energy investments — from natural gas to crude oil — on the commodities markets.

The congressmen estimated that about $20 per barrel of crude oil is inflated because of manipulative trading now occurring in the energy futures markets.

“People do not mind paying for a product if they feel they're getting a fair price,” said Courtney, adding that current market conditions don't warrant the roughly 30 percent spike in energy prices this year.

The futures markets are basically giant exchanges where contracts are bought and sold that determine the future price for a wide variety of commodities, from grain and livestock to gasoline and heating oil.

Currently, the New York Mercantile Exchange, or NYMEX, trades huge amounts of energy futures daily that determine future pricing for gasoline, residential heating oil and natural gas. The exchange is regulated by the federal Commodities Futures Trading Commission, created by Congress in 1975 to prevent manipulation and fraud among the commodities markets.

But a growing number of energy trades are being done on an “over the counter” basis without any regulatory oversight. Courtney and Stupak said they are co-sponsoring the so-called PUMP act because of the growing number of these “dark market” trades — devoid of any regulatory oversight — that they believe are largely responsible for the increase in energy prices this year.

Their legislation would provide more regulatory oversight of all energy-related commodities trading, provide for quicker enforcement of manipulative or fraudulent trading and levy stiffer penalties in the case of market manipulation.

In addition, Courtney said greater oversight would make the energy traders “accountable to real market conditions, not speculation.”

Courtney said the public is “dumbfounded by the increase in (energy) prices over the past four or five months unconnected to market conditions.” He said rising energy prices were a major concern at a recent town hall-style meeting he held in Waterford. “People were literally waving their heating oil bills in the air asking what Congress was going to do about,” Courtney said.

The Day, Anthony Cronin, Business, 12/20/07