The loophole exempts some energy traders from public regulation. The exemption was lobbied for by Enron and slipped into a bill in the year 2000 by current McCain co-chair Sen. Phil Gramm. The loophole means that federal regulators are not fully able to oversee the oil futures market.
“For the past years, our energy policy in this country has been simply to let the special interests have their way—opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay $4.00 a gallon. My plan fully closes the Enron Loophole and restores common-sense regulation as part of my broader plan to ease the burden for struggling families today while investing in a better future,” Obama said.
Obama’s proposal calls for U.S. oil futures to only be traded on regulated markets. Currently, 30% of all U.S. oil futures trading are unregulated. Obama also supports legislation that would direct the Commodity Futures Trading Commission (CFTC) to investigate whether additional regulation is necessary. He also proposes working with other nations to regulate the global oil futures trading market, and would call on the Federal Trade Commission and the Department of Justice to investigate price manipulation in the oil market.
The Bush administration claims that oil speculation is not pushing the price higher. Yesterday Energy Secretary Samuel Bodman told reporters, “Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices. There is no evidence that we can find that speculators are driving futures prices.”
Before Bodman became Energy Secretary, he was the CEO of Cabot Corp, which is an oil and gas company. So what would you expect an administration full of oil men to say, “Yes we are cheating the American people.” I don’t think that we will ever hear that.
Most economists believe that 20%-30% of the increase in the price of oil is being caused by speculators. Obama’s plan isn’t flashy, but it is what is needed now. We need to close the loopholes that Republicans created in oil futures trading, and bring it back under regulation. Don’t be surprised if one the oil futures market is regulated and investigated, the price of oil decreases dramatically.