Sunday, July 06, 2008

Feeling Pain at the Pump ? Congress needs to pass the PUMP Act

Congresswoman Bachmann, Congressman Kline and Senator Norm Coleman, all seem to believe that by opening areas for drilling will reduce oil prices.
That may be true, but how long and how much ?

Guy Caruso of the Department of Energy’s Energy Information Administration said “Drilling in U.S. waters offshore would produce nothing for five or 10 years and even then only add a minimal amount of oil for the supplies. And so, in the year 2018, it would not knock more than a nickel off your gallon of gas.”

While ANWR and OCS may part of the solution, the emphasis on those proposals will take too long. Plus, no one mentions how much the royalties will be nor who will get those royalties (individual states or the US Treasury) nor if they will be subject to any cap.

At a hearing held by the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee on June 23rd, Congressman Jay Inslee (D-WA) posed a timely question. Inslee forced witnesses to chose between opening up undeveloped Alaskan oil fields and increased government regulation. All panelists said regulation would have an immediate impact, whereas new Alaska oil would take years to affect the market.

The solution must address the abilities of speculators to impact the market price.

Don’t believe that speculators are driving the price?
Americans are consuming less (as of March highway travel is down 4.3% and the auto industry is seeing a dramatic drop in sales of SUVs and trucks as people look to more fuel efficient vehicles) but prices have continued to rise.
The Saudi petroleum minister, Ali I. Al-Naimi, said his country will reach the 9.7 million level by July (up from 9 million) and the Saudi government will invest in oil projects that would allow Saudi Arabia to have the capacity to produce 12.5 million barrels per day by the end of next year; yet prices have continued to go up.

So while our consumption is going down and world production is increasing, prices are rising.

To address the problem, the government needs to have all the tools it needs.

There are two types of oil futures speculation. Market trading takes place through the New York Mercantile Exchange and is overseen through the Commodity Futures Trading Commission (CFTC). However, most oil futures speculation occurs “over-the-counter.” This speculation is conducted off of the market, without any regulation or oversight by the CFTC. The CFTC needs to have the manpower and mission to address this problem. It is not unreasonable that a 30% reduction in price could occur if the CFTC had greater control to collect trading data on foreign trading boards.

This legislation would make immediate impacts … not years.

Congress has a number of bills pending, but the most comprehensive was proposed by Congressman Bart Stupak (D-MI) in the “Prevent Unfair Manipulation of Prices Act of 2008″ ( HR 6330 ) – aka the PUMP Act. It was initiated June 20 and already has bi-partisan support. There are 58 co-sponsors including Jim Oberstar (MN-08) and Tim Walz (MN-01) .
The Minnesota delegation needs to expedite the passage of this bill. It has been assigned to the Agriculture Committee where Collin Peterson (MN-07) is the chairman and Walz is a member. Peterson and Walz were effective earlier this year in the farm bill when Congress addressed the controversial “Enron loophole”; however that piece of legislation only closed the door to natural gas trades on unregulated exchanges - not oil trades.
Please contact your member of Congress to encourage them to become a co-sponsor of this legislation. If they do not wish to support it, then ask the question how they will address the speculators influence on the price of oil. Those that do not have a plan are the problem -- and those that only believe that drilling is the answer -- are dictating a decade of higher prices.

FYI - a companion bill has been introduced in the Senate - S 3185
Please encourage Senators Coleman and Klobuchar to support this bill. Once again, because their positions on the Agriculture Committee, they will be the first to address the legislation.

Regardless of your opinion on drilling, this legislation can only help.

1 comment:

Anonymous said...

Makes sense to me. We cannot wait ten years while Iran gets rich off these prices.
Good post.