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Managing America: Energy

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Week Ending June 27, 2008

H.R.6377 Energy Markets Emergency Act of 2008

Congress looks back to 2007 when crude oil was an average of $72 per barrel and compares the cost of doing business now with the cost last year. Findings in the bill reflect that the airlines spent $61 billion on jet fuel in 2008, up by $20 billion over last year. Autos are paying twice the price per gallon since 2001 and trucks are paying nearly triple the price over 2001 for diesel. Congress recognizes that demand has increased but refers to the International Monetary Fund report this year that speculation may be a significant reason for the high prices.

The Commodity Futures Trading Commission, created in 1974 “with the mandate to enforce and administer the Commodity Exchange Act, to ensure market integrity, to protect market users from fraud and abusive trading practices, and to prevent and prosecute manipulation of the price of any commodity in interstate commerce.”

Congress has a mandate to intervene when business practices enter the realm of interstate commerce and does so in this bill that directs the CFTC to:

Curb immediately the role of excessive speculation in any contract market within its jurisdiction on or through which energy futures or swaps are traded and eliminate that excessive speculation, price distortion, sudden or unreasonable fluctuations or unwarranted price changes. The CFTC will also look to curtail any other unlawful activity that is causing major market disturbances that prevent the market from functioning under the forces of supply and demand for energy commodities.

Sponsor:  Rep. Collin Peterson (MN-7^th)

Vote: Passed House June 26, 2008 402 to 19  RC 468

Cost to the taxpayers:

Earmark Certification:  

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(a) Findings- The Congress finds as follows:

(1) The Commodity Futures Trading Commission was created as an independent agency, in 1974, with the mandate to enforce and administer the Commodity Exchange Act, to ensure market integrity, to protect market users from fraud and abusive trading practices, and to prevent and prosecute manipulation of the price of any commodity in interstate commerce.

(2) Congress has given the Commodity Futures Trading Commission authority under the Commodity Exchange Act to take necessary actions to address market emergencies.

(3) The Commodity Futures Trading Commission may use its emergency authority with respect to any major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for a commodity.

(4) Congress has declared, in section 4a of the Commodity Exchange Act, that excessive speculation imposes an undue and unnecessary burden on interstate commerce.

(5) On June 6, 2008, the price of crude oil traded on the New York Mercantile Exchange hit an all-time record of $139.12 per barrel.

(6) The average price of a barrel of crude oil in 2007 was $72, and the average price of a barrel of crude oil to date in 2008 is $109.

(7) Heating oil futures contracts have risen in price from $2.97 to $3.81 during the March through May contract months.

(8) United States airlines are forecast to spend $61,200,000,000 on jet fuel in 2008, which is $20,000,000,000 more than they spent for jet fuel in 2007.

(9) According to the American Automobile Association--

(A) families and businesses are paying an average of $4.07 per gallon for regular gasoline, which is near the all-time high and is more than double the price in 2001; and

(B) truckers and farmers are paying an average of $4.77 per gallon for diesel fuel, which is near the all-time high and triple the price in 2001.

(10) During this decade, energy demand has been steadily on the rise in nations such as China and other Asian exporting nations.

(11) In a May 2008 report, the International Monetary Fund raised the possibility that speculation has played a significant role in the run-up of oil prices, and stated `It is hard to explain current oil prices in terms of fundamentals alone. The recent surge in the oil price seems to go well beyond what would be indicated by the growth of the world economy.'.

(b) Direction From Congress- The Commodity Futures Trading Commission shall utilize all its authority, including its emergency powers, to--

(1) curb immediately the role of excessive speculation in any contract market within the jurisdiction and control of the Commodity Futures Trading Commission, on or through which energy futures or swaps are traded; and

(2) eliminate excessive speculation, price distortion, sudden or unreasonable fluctuations or unwarranted changes in prices, or other unlawful activity that is causing major market disturbances that prevent the market from accurately reflecting the forces of supply and demand for energy commodities.

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