|June 29th, 2008, 12:01 PM||#1|
enron loop hole
Speculators and investment banks can game the energy trading markets, using loopholes in commodities law to drive up the cost of energy and reap record profits… at the expense of American families and small businesses!
One of the biggest factors in high oil prices, according to many experts, is that investors, such as hedge funds and investment bankers, can use loopholes in commodities law to manipulate the market and drive crude oil, heating oil, gasoline and diesel fuel prices to new heights.
Congress is aware of the problem and lawmakers recently passed legislation to address the “Enron Loophole,” one of the major loopholes that opens the door to abusive trading practices, but the law didn’t go far enough.
Unfortunately, other loopholes exist that allow energy trading on completely “dark” exchanges. For example, the “Foreign Markets Loophole” allows American energy commodities to be traded overseas – exempt from U.S. oversight.
These so-called “Dark Markets” – commodities markets that are not policed by U.S. authorities provide for an open the door to manipulation, even outright control of the markets.
For example, speculative investors can buy and sell millions of barrels of U.S. destined oil and other energy products every day in the United Kingdom and even in Dubai… but are not made subject to the transparency and accountability laws that govern exchanges here in the United States!
Additionally, through the so-called “swaps loophole,” financial investors can “game the markets” for pure profit by buying up positions in the energy markets, without any limitation on the size of the positions they can take. One recent estimate suggested that they now control one third of the commodities markets, or $150 billion - a 1,000% increase in less than five years!
Some experts believe that as much as 60 percent of the cost of a gallon of gasoline or heating oil can be attributed to pure speculation and abusive –even manipulative – trading practices, yet most trading is “dark” and federal authorities can neither fully police or see the data in the majority of the trading markets.
The energy trading markets were originally set up to provide energy producers and distributors with an environment to manage risk and produce the best possible price for their customers. But they are clearly no longer the driving force in the market. Profiteering speculators and investment banks care little about establishing a price for energy based on supply and demand fundamentals – they care about turning a PROFIT.
Latest News & Updates
Ban on hedge fund oil investments considered
With pump prices holding above $4-a-gallon, there is no shortage of proposals from Capitol Hill about how to address speculation in oil markets.
(June 19, 2008)
Oil crisis fuels blame game
LA Times (June 19, 2008)
Soaring costs are squeezing gas station owners too LA Times (June 10, 2008)
Senate Follow-up Letter to CFTC
(June 12, 2008)
Mr. Gerry Ramm Oral Testimony
(June 3, 2008) before the Committee on Commerce, Science and Transportation, United States Senate, Washington, DC
View the webcast
Senate Committee on Commerce, Science and Transportation
House Agriculture Subcommittee on General Farm Commodities and Risk Management
Click here to read more articles in the Archives ...
Congress and the President Need to Act.
In order to restore a sense of order to the commodities market, Congress and the administration need to go back and make sure that all energy trading and all energy exchanges are fully transparent and subject to the rule of law. It’s only fair.
The policymakers in Washington can help reduce the price of oil by shutting down all the loopholes, including the foreign markets and swaps loopholes, and by getting tough on speculative investors and profiteering energy trades and swaps. The United States economy depends upon a reliable supply of energy available at a fair price in a free market. You can help restore the principles of the free market by calling your Congressional representatives and the White House, urging them to pass legislation ensuring that all energy trading is fully transparent, accountable to the rule of law, and based on supply and demand principles.
It’s Only Fair.
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Last edited by luvitmyjeep; June 29th, 2008 at 12:09 PM.