Ed Markey: We Cannot Let Market Manipulation Drive Up Oil Prices

About Edward J. Markey:

Edward J. Markey is a U.S. representative from Massachusetts and the ranking member of the Natural Resources Committee and is a senior member of the Energy and Commerce Committee.

As oil prices have risen, we've seen a sharp increase in people buying oil who never intend to take possession of it. Financial speculators now make up two-thirds or more of the purchasers of contracts for the future delivery of oil—up from 30 percent a decade ago.

As oil prices and speculative investments rise, we need to be particularly vigilant against the risk of market manipulation. We can't afford a situation where speculators artificially manipulate markets, driving prices higher while millions of American families pay more at the pump.

The Obama administration has already taken several actions to step up oversight of oil markets and close dangerous loopholes that were allowing some traders to operate in the shadows. The new rules enacted by the Dodd-Frank Wall Street Reform—and now being implemented by the Commodity Futures Trading Commission—take important steps to making sure no single trader easily manipulates the market on their own.

[Read: Obama Pushes Crackdown on Oil Speculation.]

The new steps announced by President Obama this week will strengthen oversight of energy markets. The president announced new executive actions to better monitor, analyze and investigate trading activities in energy markets and more quickly implement the tough consumer protections under Wall Street reform. And he called on Congress to pass a package of measures to crack down on illegal activity and hold accountable those who manipulate the market for private gain.

First, President Obama calls for immediate funding to put more cops on the beat to monitor activity in energy markets, as well as upgrade technology so that enforcement officers have the same sophisticated tools that traders are using. Secondly, he calls on Congress to increase the civil and criminal penalties for illegal energy market manipulation, toughening key financial penalties tenfold to make potential manipulators think twice. Finally, the president proposed that Congress giving new authority to the oversight agency for oil markets, to protect against volatility and excess speculation by making sure that traders can post appropriate margins, essentially down-payments, that ensure traders actually have the money to make good on their trades.

[See a collection of political cartoons on energy policy.]

These proposals will protect consumers by increasing oversight of energy markets. While none of these steps by themselves will bring gas prices down overnight, they will help prevent market manipulation and make sure we're looking out for American consumers.

At a time when we've seen oil and gas trading activity increase by 30 percent, when we've seen prices shoot up and we've seen uncertainty in these markets increase, it is important to be doing everything we can to have oversight in the markets—including ensuring that regulators have the tools and resources that they need to make sure that manipulation isn't taking place. That should be something that everybody, no matter their party, should agree with. And I hope Americans will ask their members of Congress to step up and support the president's proposals.

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Tags:

Obama administration,

energy policy and climate change,

gas prices,

oil