McConnell Votes Against Lower Gas Prices

The DSCC recently issued this press release:

McConnell Votes Against Lower Gas Prices
Opposes legislation to crack down on oil speculation and market manipulation

Senate Minority Leader Mitch McConnell voted against a bill today to lower gas prices by curbing excessive speculation in energy markets. Experts have noted that speculation is driving up the price of a barrel of oil, and a recent House committee report revealed that speculators – institutional investors buying contracts with no intention of taking delivery of oil – now account for 73% of all trading of crude oil contracts on the New York Mercantile Exchange, up from 37% in 2000.

“Mitch McConnell had an opportunity to lower the price of gas today, but instead he voted with the speculators who are profiting from Kentuckians’ pain at the pump,” DSCC spokesman Matthew Miller said. “Mitch McConnell’s constituents deserve better than a politician who sides with Wall Street speculators over Kentucky families.”

McConnell voted against legislation to guard against price manipulation just one day after the Commodity Futures Trading Commission announced its first case against a trading fund in the agency’s probe of crude oil market manipulation. The bill will eliminate so-called “dark markets” to increase transparency and accountability in commodities trading, strengthen the CFTC’s enforcement capacity, and close the “London Loophole” so all U.S.-based trading of American commodities is subject to American regulation.

Speculation is driving rising oil prices past where they should be, even with flat supply and rising demand. Economists and energy experts believe that speculation is helping drive the sudden spike in oil prices, which rose more than 50% between February and June. [Mark Zandi, Chief Economist, Moody’s Economy.com, on PBS Online Newshour, 6/6/08; Testimony of Gerry Ramm, Petroleum Marketers Association of America, before Senate Committee on Commerce, Science and Transportation, 6/3/08; McClatchy, Interview of Michael Greenberger, 6/17/08; Energy Information Administration, 7/23/08]

Even Big Oil thinks their product should be selling for less than half the price. The CEO of Royal Dutch Shell has said that the market fundamentals are the same as when oil sold at $60 per barrel, and an ExxonMobil executive testified in April that the price of oil should be $50 to $55. [Washington Post, 4/11/08; Senate Judiciary Committee, 4/1/08]

Current law leaves oil markets vulnerable to manipulation. The legislation closes loopholes written by Republican lawmakers and the Bush CFTC that allow vast amounts of trading in crude oil futures takes place in the shadows. As Walter Lukken, Acting Chairman of the Commodity Futures Trading Commission, conceded, crude oil markets are “ripe for those wanting to illegally manipulate the markets.” [CNBC, 06/17/08]

Futures markets have become playgrounds for big investors, rather than vehicles to buy and sell oil. Speculators – institutional investors buying contracts with no intention of taking delivery of oil – now account for 73% of all trading of crude oil contracts on the New York Mercantile Exchange, up from 37% in 2000, according to a House committee report. [Wall Street Journal, 1/23/08]