Congress wary of oil-market speculation
After a failed effort to boost taxes on oil companies, lawmakers turn attention to role of speculators in driving up oil prices.
As energy prices soar, Congress is under the gun to find a way out for American consumers – or, failing that, someone to blame: Big Oil, speculators, or the other political party.
Oil companies dodged a bullet in the Senate this week, as Republicans blocked an energy bill that would have imposed a windfall profits tax on them and ended billions in tax breaks. But Democrats, who control both the House and Senate, plan to bring the issue up again, even as bipartisan scrutiny shifts to the role of speculators in contributing to sticker shock at the pump.
The Senate bill, which fell nine votes short on a procedural vote, proposed a 25 percent windfall profits tax for companies that made more than 10 percent above a past average. It also would have created an Energy Independence and Security Trust Fund – and used the $17 billion in discontinued Big Oil tax breaks to fund it.
Senate GOP leaders dubbed the legislation a "no energy" bill because it produced no new domestic sources of energy. The White House threatened a veto on grounds that it would reduce oil supply and increase energy costs. It's "exactly the opposite of what the Congress should be doing at a time when consumers are already burdened with record high energy prices," President Bush said in a statement.
Democrats countered that Republicans had obstructed all measures to ease prices for US consumers. Soaring oil industry profits – and CEO salaries – are sparking so much resentment among voters that Republicans may be forced to change their votes as the issue comes up again closer to the November election, they added.
"This idea that we [Democrats] don't want any production is patently incorrect," said Sen. Charles Schumer (D) of New York, flanked by a poster claiming that Republicans are blocking lower energy prices, in a floor speech on Thursday. "We're willing to increase production, but we do not believe that we can drill our way out of this problem.
"The minority [party] is filibustering themselves right out of their seats when three-quarters of Americans demand dramatic change and the minority says no change. That is not a formula of political success," he added.
On the House side, similar partisan fireworks broke out Wednesday in a hearing on oil supply and demand in the Select Energy Independence and Global Warming Committee. Chairman Edward Markey (D) of Massachusetts blasted the "oil president and the Republican Congress" for the rise in oil prices. Republicans blamed Democrats for blocking exploration in the Arctic National Wildlife Refuge in Alaska and the Outer Continental Shelf.
"By consistently opposing more environmentally responsible production of American-made energy – whether it is oil exploration, oil shale, coal to liquids, nuclear, or refinery capacity – ... congressional Democrats have made clear they are just fine with higher gas prices, and they are blocking Republican efforts to lower them," said House Republican leader John Boehner in a statement on Thursday.
But with approval ratings for Congress at near-record lows, pressure is mounting on both sides of the aisle to break partisan gridlock and produce legislation that could help. Dealmakers in the two parties are aiming to break off elements of the failed Senate bill that could muster a majority, especially moves to rein in speculation in the oil market.
"It's absolutely imperative that we demonstrate to the American people that we understand the enormous anxiety, not to mention despair, that they are experiencing given the exorbitant increases in energy prices, both on the oil front and gasoline and diesel," says Sen. Olympia Snowe (R) of Maine.
Even before the Senate bill fell to defeat, some Democratic and Republican lawmakers were lining up behind provisions to curb speculation by raising margin requirements for those investing in futures trades and banning traders from using offshore futures markets to evade regulation.
Sen. Richard Durbin, the No. 2 Democratic leader, says he will introduce a bill to strengthen oversight of energy futures trading. The Commodity Futures Trading Commission (CFTC) has announced new initiatives to increase transparency of the energy futures markets.
"The recent dramatic increases in the price of crude oil traded on futures exchanges make these efforts paramount," said the CFTC in a May 29 statement. Democrats plan hearings next week to examine whether the CFTC has the resources to carry out this oversight role.
Recent polls signal that American consumers are also beginning to focus on the role of speculators in higher gasoline prices. "The public is becoming more sophisticated in understanding the complexities of the oil market – it's not just [blame] the greedy oil companies anymore," says Frank Newport, editor in chief of the Gallup Poll in Princeton, N.J.
"Nobody mentioned speculators last year. Now, more sophisticated reasons are sinking into the public's consciousness. That's good news for oil companies, because it diverts attention from them," he adds.