Larson, Courtney seek to cut soaring petroleum prices, Journal Inquirer

Larson, Courtney seek to cut soaring petroleum prices

By Don Michak

Journal Inquirer

June 3, 2008

Two area members of Connecticut’s congressional delegation today were expected to introduce bills aimed at cutting soaring petroleum prices by attempting to curb speculation and make more high-grade oil available on the open market.

Speaking Monday outside a Vernon gas station where some grades of gas were selling for more than $4 per gallon, U.S. Rep. John B. Larson, D-1st District, and U.S. Rep Joseph D. Courtney, D-2nd District, said they would seek to ease gasoline and heating oil costs through federal intervention.

The congressmen — flanked by representatives from the Independent Connecticut Petroleum Association, the Wyman Oil Co. in Manchester, and Mitchell Fuel in South Windsor — added that while they welcomed probes of potential oil market manipulation announced last week by the Commodity Futures Trading Commission, more must be done to regulate the traders, investment banks, and hedge funds a congressional committee recently calculated could add as much as $30 to the cost of a barrel of petroleum.

Larson, a former state Senate leader from East Hartford who serves as vice chairman of the House Democratic caucus, said his proposal was aimed at restraining speculators by requiring anyone buying oil futures in an “over-the-counter” transaction to have possession of at least some of the product being traded. He decried the electronic trades that in a few hours can boost the cost of a gallon of gas by as much as 16 cents and net speculators millions of dollars in “paper” profits over a single day.

“The CFTC has been in hibernation for the last seven years,” he said, adding that the relatively little-known regulatory agency “needs to look at” the energy-derivative trading platforms in New York and London operated by IntercontinentalExchange Inc., which has prices tied to oil futures sold by its competitor, the New York Mercantile Exchange.

Speculation in petroleum prices, whether by traders in commodities, futures, or more specialized contracts known as derivatives, needs to be stopped “in its tracks,” Larson said, especially because the rapid acceleration in the cost of gas and heating oil “defies any logic, other than greed.”

“The laws of supply and demand have been suspended,” he added. “When you have over-the-counter trades that are not regulated in Washington, it’s time for the government to step in.”

Courtney agreed with Larson that it’s time to reign in “the Morgan Stanleys and the hedge funds” that “are jumping into the market and adding nothing.”

He also said that since the CFTC disclosed its investigations last Friday, “we’ve already seen a slight moderation” in prices.

But the lawyer from Vernon said he also was proposing legislation that would require the U.S. secretary of energy to exchange 50 million barrels of light crude in the nation’s Strategic Petroleum Reserve with heavier, less refined crude.

That switch, he said, would add a significant amount of higher-grade oil to the market, an action he said was taken in 2000 that cut prices by nearly 20 percent.

Larson and Courtney were joined in Vernon by a fellow Democrat, Attorney General Richard Blumenthal, who lauded their initiatives as “measures to bring sanity and sense” to a market rife with manipulation.

Blumenthal, who was appearing at his second news conference of the day held at a gas station, called for support for his bid for a special session of the General Assembly to provide relief for gasoline and home heating oil consumers.

But he added that “no single state can combat the rash of national speculation that is engulfing the market.”

Several motorists shouted complaints about the high gasoline prices as they drove past the gathering of politicians and reporters outside the Talcottville Road Citgo station.