There's a part of Hillary Rodham Clinton's latest plan to address rising gasoline prices that probably won't get a lot of coverage, but it shows that she – or someone on her staff – has been paying attention to one Senate subcommittee's attempts to find the root causes of the problem.
Her plan, released yesterday, promises to deal with manipulation of the oil and gas markets by closing the "Enron loophole." That's a term Democrats use to point out the fact that electronic trading in the energy markets isn't regulated. Congress carved out an exemption for electronic trading in 2000, largely because – you guessed it – Enron asked for it.
Clinton's plan cites the work of the Permanent Subcommittee on Investigations, a Senate panel that has spent the past few years following various threads to figure out why gasoline prices have been so high. A couple of years ago, they looked into a fairly obscure area, speculative trading, to find out if there was any connection.
Their bipartisan conclusion: Speculators were driving up the price of crude oil – which, in turn, makes gasoline more expensive – and federal regulators didn't know about it.
In its 2006 report, "The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat," the subcommittee found that speculators were buying up so many futures contracts that crude oil was becoming more expensive than it would have been otherwise:
"The large purchases of crude oil futures contracts by speculators have, in effect, created an additional demand for oil, driving up the price of oil to be delivered in the future in the same manner that additional demand for the immediate delivery of a physical barrel of oil drives up the price on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures
contract by a refiner or other user of petroleum."
To deal with the problem, the subcommittee called on Congress to give the Commodity Futures Trading Commission more authority to regulate this kind of trading. Democrats have been trying to do that over the years, but Republicans have fought the effort, saying it would create regulatory confusion.
Even if they succeeded, there's no guarantee that the change would have much of an impact. In the April 14 issue of CQ Weekly, Coral Davenport reports that the leading operator of electronic energy exchanges – the Intercontinental Exchange – has been able to register its oil-trading functions with a subsidiary in Britain, which could put it beyond the reach of some of the new oversight.
Still, this is one of those rare ideas that might get a sympathetic hearing from all three of the presidential candidates. Barack Obama, who held his own press conference on gas prices Friday, has called for reinstating the federal regulation that was lost in 2000.
And while John McCain's advisers haven't said what position he would take on the Enron loophole, he has sided with Democrats on the issue before. In June 2003, he was one of just four Senate Republicans who voted with Democrats to restore the oversight. The measure was defeated.
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