WASHINGTON In a sign Congress may be losing patience with the U.S. futures regulator and high energy prices, lawmakers demanded on Wednesday the agency immediately crack down on excessive speculation in crude oil markets by hastening planned rules to limit concentration.
A group of 17 senators, in a letter to the chairman and commissioners at the Commodity Futures Trading Commission, said they wanted the agency to unveil a plan by May 23 to impose position limits in all energy futures markets, beginning with crude oil. The agency has already proposed such limits as part of the financial reform, but has not finalized them.
The senators said the recent drop in crude oil prices, which fell nearly $10 a barrel in one day last week, defy supply and demand conditions. Oil prices bounced back almost $6 a barrel on Monday, but then fell more than $5 on Wednesday. Gasoline prices slumped by more than 8 percent.
"The wild fluctuation could only be the result of rampant oil speculation, plain and simple," said Senator Ron Wyden, one of the lawmakers who wrote to the CFTC demanding action, in some of the strongest language attacking speculators since oil prices surged to a record $147 a barrel in 2008.
"The CFTC needs a plan to impose position limits on oil speculation before oil speculators drive up prices even higher just as Americans go to the pumps to fill up for Memorial Day weekend," he said.
The letter was signed by 15 Democrats, Independent Bernie Sanders, and a single Republican, Susan Collins.
A CFTC spokesman said the agency had no comment on the letter.
The CFTC is weighing new rules that would slap limits on the positions of big commodity traders, capping how many futures and swaps contracts any one market participant can control.
The Dodd-Frank law passed last July gives the agency the power to set position limits to curb excessive speculation "as appropriate" in 28 commodities traded in energy, metals and agricultural markets.
But some of the agency's own commissioners are skeptical the limits would prevent a run-up in prices, and experts and traders have long said the rules risk making markets more volatile by reducing liquidity.
OBAMA BLAMES SPECULATORS
With the exception of a handful of rules, such as position limits, the CFTC recently reopened most of the rules to an additional 30-day comment period. It's expected to finalize these rules beginning this summer. The agency has said it will miss a mid-July deadline to implement most of these measures.
Position limit rules have been under debate by the CFTC since commodity prices first surged to records in 2007 and 2008. The volatility in commodity prices has renewed calls for the futures regulator to crack down on speculators.
President Barack Obama has blamed speculators for driving gasoline prices higher and straining American consumers, saying there was enough oil in world markets to meet demand. The administration created a working group of federal agencies to probe potential fraud in the energy markets.
Meanwhile, Senator Carl Levin, who heads a panel on investigations, has said he plans to hold a hearing and release a report investigating speculation in the oil markets, which he blamed for pushing up gasoline prices.
"American consumers are getting gouged at the pump while speculation on Wall Street runs rampant. Today, the CFTC must implement these long-overdue position limits to crack down on excessive speculation and provide relief to American consumers," said Senator Maria Cantwell, who also signed the letter.
House Republican lawmakers, in an effort to slow down Dodd-Frank implementation, have proposed an 18-month delay of post-crisis regulations intended to reduce risk in the over-the-counter derivatives market. After passing in the House Agriculture Committee last week, the bill heads to the House Financial Services Committee on Thursday.
The delay may be passed by the House but has little chance of becoming law. There is no similar Senate bill and futures regulators say they do not need the additional time.
(Reporting by Tom Doggett and Christopher Doering;editing by Sofina Mirza-Reid and Cynthia Osterman)