Wednesday, July 9, 2008

Better At Achieving a More Immediate Relief Than Offshore Drilling

Rampant speculation in the commodities futures market is driving up prices
out of proportion to marketplace demands. The problem is speculators are
increasingly buying and selling commodities such as oil even though they
have no intention of using the product. The unregulated speculators are
pocketing billions of dollars at our expense. The cost of food has gone
up, the price at the pump has gone way up, and I'm already concerned about
how much more it will cost to heat my home this winter.

To lower oil prices for all Americans we need to increase domestic supply,
exploration, alternative energy sources and conservation. We also must
protect bona fide speculation and hedging.

To address excessive speculation, Congress should promptly take the
following actions:

1. Re-establish strict position limits on energy commodities - Position
limits have existed since 1936 and work well at curtailing excessive
speculation. Any trader that in not hedging with the intention of taking
physical delivery of a commodity must be subject to strict position limits
in all contract months.

2. Close the London Loophole - Foreign Boards of Trade with U.S. Terminals
trading futures contracts that cash-settle against U.S. contracts should
face the exact same regulations as U.S. exchanges. It is not fair for U.S.
futures exchanges to face more regulation than their foreign counterparts
trading in U.S. commodities.

3. Regulate "swaps trades" - All trades in the over-the-counter (OTC)
swaps market must be subject to strict position limits. It is unfair to
exempt swaps dealers from the same regulations that other market
participants face. Experts have estimated the size of the OTC markets as
nine or ten times larger than the futures markets.

4. Fully close the "Enron loophole" - "Exempt Commercial Markets" that
trade U.S. contract which are nearly identical to fully regulated
contracts should no longer be exempt from the same regulations that apply
to Designated Commercial Markets such as the NYMEX.

5. Bring transparency to all energy trading - Positions of traders in all
markets should be reported to the Commodity Futures Trading Commission
(CFTC) and should be properly categorized based on where the trades occur
and who is doing the trading. This will provide vital information that can
be used to detect and prevent market manipulation.

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