As the Obama administration and Congress struggle to right the economy, one of the first things they should do is move quickly to re-regulate the energy market. Speculators trading in energy futures have wreaked havoc on the economy, while making themselves obscene profits.
Speculation drove the price of crude oil from $27 a barrel in September 2003 to a high of $147 in July. The wild fluctuations we’ve see in the energy futures market in the last year can’t be explained away as simple supply and demand economics. While a decrease in demand has played a part in the recent drop in oil prices, it can’t account for the 75 percent drop in just five months.
Rather, we’ve seen the speculative bubble burst, triggered by the Wall Street financial crisis and the resulting tightening of the credit market.
Absent re-regulation of the market, it’s only a matter of time before speculators take advantage of the government’s aggressive efforts to restore liquidity and unfreeze the credit markets. And once again, it will be American consumers who get gouged at the pump.
Regulatory reforms to strengthen oversight over the nation’s energy trading markets are sorely needed to restore true competition to America’s oil and gas markets. If Congress is truly interested in protecting families from outrageous, inflated fuel prices, it will limit the ability of speculators such as Goldman Sachs and Morgan Stanley to control refineries, pipelines and storage facilities. Putting in legally-binding firewalls to limit energy traders from speculating on insider information gleaned from a company’s affiliated energy operations will reduce Wall Street’s ability to manipulate prices.
American families expect the Obama administration and Congress to deliver long-term solutions to this economic crisis. Those solutions should include incentives to help families reduce their dependence on fossil fuels by providing them support to purchase hybrid vehicles, install solar panels and make energy-efficient improvements to their homes and a sincere commitment to mass transit.
I also have a testimony delivered to the U.S. House Committee on Agriculture about the need to reform the energy markets.