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Klobuchar Calls for a "Cop on the Beat'' to Stop Speculation in Energy Markets

Cites market speculation as one factor behind spike in oil and gas prices

June 3, 2008

Washington, D.C. – U.S. Senator Amy Klobuchar said today that federal regulators need to be more vigilant of world energy markets to make sure that speculation and unregulated trading are not driving up oil and gas prices. Klobuchar, a member of the Senate Commerce Committee, spoke during a hearing at which several energy market experts said increased trading overseas and in unregulated energy markets has been one factor in the recent spike in fuel prices.

“Middle-class families are feeling the squeeze in their pocketbooks while oil companies are raking in record profits and energy markets have turned into gambling halls,’’ Klobuchar said. “You can write all the laws you want, but if we don’t have aggressive enforcement of the laws, we’re not going to get the results our consumers and businesses need.’’

Witnesses Tuesday included George Soros, chairman of Soros Fund Management, who said the rise in oil prices is a classic market bubble, driven in part by market forces such as supply and demand, but also driven by speculators motivated by volatility in currency and commodity markets. Another witness, Gerry Ramm, an independent gas station owner, testified that trading on one foreign exchange, the Intercontinental Exchange in London, has more than quadrupled since 2005. Trades there are not regulated by U.S. authorities.

Klobuchar called on the Administration to take several steps to reduce speculative trading that can increase market volatility and raise oil prices. They include:

• Raising margin requirements, the amount of cash that traders must put down on trades financed with borrowed money, to reduce speculative pressure that pushes up oil prices.
• Increasing oversight of trades that are placed on foreign exchanges to avoid regulation by U.S. agencies.
• Adding protections to further close the “Enron loophole,’’ which exempts electronic energy trades from supervision by federal commodity authorities, so trades are properly regulated.

“When I was a prosecutor we had a simple rule: follow the money,’’ Klobuchar said. “I want us to be able to follow the money and see what’s driving this market bubble. We need a cop – and prosecutors – on the beat.’’

In addition, Klobuchar said America needs a long-term national energy policy that will reduce America’s dependence on foreign oil and promote the transition to alternative fuels.

“We cannot be held hostage to oil-producing countries that do not share our values and interests,’’ Klobuchar said. “While we need to give consumers immediate relief at the gas pump, we also need a national energy strategy that will increase the supply of homegrown, renewable fuels.’’

Klobuchar authored a provision in the new Farm Bill which will encourage farmers to increase the planting of cellulosic-fuel crops, which represent the next generation of biofuels, and has introduced legislation increasing federal incentives for private investment in wind energy, solar power and other forms of domestic renewable energy.

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