WASHINGTON - Several top House Democrats are pushing legislation that would help hand back control of investments in oil and other energy commodities to airlines, trucking companies and other legitimate investors, and help dull the expensive impacts speculators are having on our oil and other energy prices. The legislation would tell Wall Street speculators that they can no longer invest in these financial products if they include energy, and phase out oil and other energy commodities from current index funds. Eventually, this will put more control back into the hands of companies and investors who have a real stake in the price of oil for their business, not just to make a quick buck.
The bill is called the Halt Index Trading of Energy Commodities (HITEC) Act and was introduced Friday, April 27 by Rep. Ed Markey (D-Mass.) with Reps. Barney Frank (D-Mass.) and Rosa DeLauro (D-Conn.).
Commodity index funds are financial products that allow customers to purchase a wide range of commodities without having to actually physically possess and use those commodities. First created by Goldman Sachs in 1991, these have grown explosively in recent years. Commodity index traders now collectively comprise the single largest group of non-commercial participants in commodity markets, giving them significant power over both our commodities markets, and even the price of products like gasoline and bread.
“Energy commodity index funds are one of the primary tools of speculators, and they’ve artificially disrupted our economy for too long," said Rep. Markey, who is the Ranking Member of the Natural Resources Committee. “This bill will get the gasoline gamblers out of the markets, easing pressures at the pump for consumers and small business and restoring supply and demand as the primary forces driving our energy commodities markets."
“This legislation is an important addition to our efforts to restrict speculation in commodities swaps markets," said Rep. Frank, who is the Ranking Member of the Financial Services Committee. “It would greatly reduce what many believe is a potentially significant factor in higher oil prices, while allowing companies which actually use energy commodities to continue using swaps to stabilize the cost of materials that are critical for their businesses."
“We know that the volatile oil and energy prices are caused by speculation, not by supply and demand, and this legislation will help rein in rampant speculation and bring the artificially high oil and gas prices down to their true levels," said Rep. DeLauro. “High oil prices affect every aspect of Americans lives, not just the cost of traveling, but of heating homes, food and other purchases," said Congresswoman DeLauro. “Until we control this excessive speculation, Wall Street will continue to profit at the expense of the American consumer."
This bill would prohibit new investments in commodity index funds with energy commodities by speculators as of the date of enactment. It would also grant existing commodity index funds that fall under this ban two years to wind down their energy commodity investments. After that, commodity index funds would not be allowed to own energy commodity futures, swaps, or derivatives if they count speculators among their investors.
This bill covers both exchange-traded energy commodities and the over-the-counter swaps market. The bill does not cover agricultural commodities like wheat or metal commodities like gold. It also does not involve the trading of electricity in any way.
