WASHINGTON–With gas prices surging past $4 a gallon in Connecticut, members of Congress are in a high-speed race to address their constituents’ pain at the pump.
Sen. Richard Blumenthal is calling for a wide-ranging federal investigation of the oil and gas industry, raising questions about market manipulation and price gouging. Rep. Joe Courtney is urging federal regulators to crackdown on Wall Street speculators, who he says are spurring the price spikes.
Rep. Rosa DeLauro says the quickest way to bring down prices is to tap the Strategic Petroleum Reserve, the emergency oil stockpile maintained by the U.S. Department of Energy.
Whether any of these proposals can gain traction is unclear, especially in time to achieve lower gas prices before the summer driving season gets underway. They may well be headed for a political pile-up in Washington, as the two parties ramp up for a battle over this politically potent issue that affects everyone from families to small businesses to farmers.
Even as Democratic lawmakers in Connecticut and elsewhere seek to draw attention to the role of market speculators and oil companies, Republicans are teeing up a series of bills to increase domestic gas and oil exploration. One GOP measure, for example, would set time limits for the Administration’s consider new drilling permits in the Gulf of Mexico. Another would open up new drilling off both the Atlantic and Pacific coasts.
“The Administration’s anti-energy actions of the past two years have left us more vulnerable to oil price spikes,” House Natural Resources Committee Chairman Doc Hastings, R-Wash., said in a recent statement. His committee has drafted three offshore energy bills that will triple offshore American energy production, and the Republican leadership is planning to bring at least one of those to a vote next week, when Congress returns from its spring break, a spokeswoman for Hastings said.
DeLauro, Courtney and others said they are open to increasing domestic energy production. But the House bills wouldn’t provide any short-term relief, they argued, and more immediate measures should be considered.
“We should rally around steps that offer some relief immediately,” said Blumenthal, Connecticut’s junior Democratic senator. “All of these other plans–whether it’s oil exploration or renewables or other potential solutions–are in the longer term. They will take years to achieve on a scope and scale that will make a real difference.”
Courtney said voters have been asking him about high gas prices at every stop he makes these days. “I was buying a newspaper at a convenience store and got peppered with questions,” he said, noting that in Vernon, regular has hit $4.25 gallon. “It’s pinching people hard.”
The 2nd District Democrat is planning to hold a press conference on a farm Thursday to draw attention to what he says is an easy, existing solution. He has for months been calling on the Commodities Futures Trading Commission, a financial-market oversight agency, to issue new regulations limiting the number of so-called “swaps,” a type of financial bet, that oil speculators can make each month.
Congress gave the CFTC that authority when it passed the so-called Dodd-Frank bill that tightened federal oversight of Wall Street. That law sought, among other things, to curb unscrupulous derivatives trading, whether of farm commodities or oil.
“In terms of the tools that we have available right now, the Dodd-Frank bill is law,” Courtney said. “It’s sitting there unused.”
He pointed to analyses by Goldman Sachs and other firms that estimate speculators have driven oil prices up by $20 to $27 a barrel–a hike that has little to do with regular market forces, like supply and demand. Courtney said that curbing speculators’ role in the market could bring retail prices down by as much as $1 a gallon. “Clearly what we’re seeing is a complete avalanche of index trading and speculative trading that I think is unhinged the price form the market,” he said.
Although Congress passed the Wall Street overhaul last summer, the CFTC has yet to act. “There’s a fear factor among some of the commissioners that they’re wading into” uncertain territory and might not know the full ramifications of any new rule, Courtney said. But he said Congress’s intent with the new law was clear, and the current spiral in gas prices should force the agency’s hand.
Blumenthal has taken that argument a step further. The former Connecticut Attorney General said high gas prices are “first and foremost” a law enforcement issue. Last week, President Obama announced that the U.S. Justice Department would set up a task force to monitor oil and gas markets for signs of fraud or manipulation.
Blumenthal said that was a good first step, but not aggressive enough. Nowhere in the U.S. attorney general’s memo on the new task force was “the word investigate,” Blumenthal noted.
He called on DOJ to “start a full-scale national investigation not only into potential illegal market manipulation, but also price gouging, [and] unlawful collusion among the big oil companies.”
The inquiry should focus on “every level” of the industry, from the refiner, to the wholesaler, to the retailer, he said.
Blumenthal conceded that is not a silver-bullet solution. He said Congress should take other steps, from fully funding the CFTC so it can put “more cops on the beat,” to going after OPEC on anti-trust grounds. On the latter, he recently signed on to a Senate bill that would give the Justice Department the power to bring legal action against OPEC for operating as “a cartel” that sets and manipulates prices in the oil market.
DeLauro said she would support a federal inquiry into speculation and other possible wrongdoing, among other steps. But “the thing that has biggest and quickest impact” would be releasing oil from the nation’s Strategic reserve. She and other House Democrats called on President Obama to take that step back in February.
They still have not gotten an official response from the White House, but DeLauro said she thought that option was “on the table.” The Strategic Petroleum Reserve was set up in the 1970s during the oil embargo to prevent disruptions in U.S. supply.
DeLauro noted that Obama’s three predecessors have all tapped the reserve, to significant effect. President George Bush did so in 1991, during the first Gulf War, spurring a 33 percent drop in prices; President Bill Clinton did so in 2000, resulting in a 19 percent plummet; and President George W. Bush released oil from the reserve in 2005, prompting a 9 percent drop in prices.
“If you release a small amount of oil, you can have a huge impact on price,” DeLauro said. “It helps to calm the markets… and it has a real impact on oil speculators. It puts a damper on their efforts.”
But aside from calling for others to act, whether a regulatory agency or the White House, Congress’s power to control prices at the pump may be limited–especially in the short term.
Indeed, Courtney said he wasn’t sure how much his colleagues’ proposals would accomplish, if anything.
“I’m not sure how much a task force or a grand jury is going to impact in terms of really changing the landscape,” he said. As for tapping the Strategic Reserve, he said, “given the fact that supplies, by almost any analysis, are really not considered to be low, I am a little skeptical about whether or not even that would jolt the market.”
He said he would happily sign on to either if he thought it would reap quick results. But for now he’s sticking with his call for the CFTC to act. That highlights the lack of short-term levers Congress can pull, even as gas prices continue to climb.
But that doesn’t mean lawmakers won’t continue to talk about the issue, as public anxiety mounts every time a family pulls into their local station to fill up.