Mr. ROBERTS. Mr. President, I wish to discuss what everybody else is discussing these days--I say discussing or maybe even cussing--and that is gas prices and, more to the point, some unfortunate finger-pointing that I think is going on in regards to our energy policies and why we see the increase we are seeing at the gas pump and the role of speculation in regards to the futures market and the energy environment we are now living in that is so challenging.
I have the privilege of being the ranking member of the Agriculture Committee, which has jurisdiction over the Commodity Futures Trading Commission, and I feel it is very important to address some of the claims being made by a number of my friends--some across the aisle--this week with regard to speculation in the commodities market.
From the rural farmer to the urban commuter, Americans everywhere are, obviously, deeply impacted by high gas prices. That is the biggest and most often negative sign we see when we drive anywhere: Whoops, we see all of a sudden that the gas price has shot up 10 cents. Unfortunately, I do not think posturing or finger-pointing does anything to minimize the pain felt at the pumps.
Similar to the annual planting and harvesting seasons in Kansas, a yearly occurrence happens in Washington, DC, for certain Members of Congress to blame the commodity markets every time a particular commodity reaches an uncomfortable price level. If we see a big price jump, we, obviously, want to blame the commodity markets. It is easy to do. We saw it in the 1970s when we had gas lines during the Carter administration, the 1980s, the 1990s. It is the same old talking points. We could have the speech in the file. Just pull out the file, cross out the date, and start making these points.
But let me talk about some economic facts, if I might. The populist rhetoric fails to acknowledge that everyone's money is the same color in the futures market. For every buyer, there is a seller and for every seller there is a buyer.
The historical problem for futures markets and the hedgers who use them is, oftentimes, particularly in the deferred month contracts, there is not the liquidity or an adequate number of market participants to take the other side of a trade to allow the hedgers to manage their deferred price risk.
Market participants who actually provide this liquidity provide a valuable tool that allows producers and [Page: S2135] consumers of products to lock in their inventories well in advance, which can lead to lower costs to producers and certainly better prices for consumers.
If long speculation and the liquidity it provides is artificially driven from the market, the potential short-term advantage of lower prices could lead to shortages in production, higher demand, and even higher prices for both energy and agricultural commodities.
My point in this dissertation on futures markets 101 is to emphasize that speculation is not manipulation. Speculation is trading to make a profit from anticipated price changes--either higher or lower. Manipulation, on the other hand, is intentionally acting to cause artificial price changes.
As explained by the Commodity Futures Trading Commission, the independent regulatory arbiter of excessive speculation, speculation is excessive when it causes any sudden or unreasonable fluctuations or unwarranted changes in the price of a commodity.
In fact, the CFTC currently has the authority to regulate against price manipulation. So if we want to go to the people who are in charge to make sure there is not any manipulation, we already have the regulatory body and they are doing exactly that and it has had this authority since its creation by Congress in 1974.
Furthermore, we have experts at the clearinghouses, at the National Futures Association, and at the CFTC whose job it is to watch these markets minute by minute, hour by hour, day by day, to assure everybody that the discovery of prices between buyers and sellers is occurring openly and transparently.
Yet when prices just so happen to move above what somebody in this body might think is reasonable or an uncomfortable level, we have a tendency to blame the participants in the market rather than the multitude of factors and economic variables these market participants react to each minute the market is trading.
Let's examine some of these real factors that are affecting our energy prices.
First off, there is tremendous increased demand outside the United States; particularly, in Asia, China. It has caused the price of oil to rise rather dramatically. Even with the increased production in Canada, the United States, and Brazil, declines in the North Sea, Mexico, Sudan, and Libya have impacted the global supply.
Second, our U.S. refining capacity has decreased as a result of stricter environmental regulations, where they get their crude from. Both have lowered the supply of gasoline enough to prop up prices. We see reports in the press every day about one refinery making it big and other refineries are having a lot of difficulty.
Third, restricted domestic energy development on Federal lands has disrupted our futures projections.
Fourth, fear over Iran's nuclear weapons ambitions is leading to increased demand for gasoline, as people try to stock up in anticipation of any supply disruption that would be based on the possibility of a conflict in the Middle East.
Lastly, I would simply point out that blaming speculators ignores the inflationary aspects of the monetary policies of several central banks around the globe. It does not take a speculator to know that when the U.S. Treasury prints more money, it drives down the value of the dollar and drives up the price of raw materials and commodities, such as oil, priced in dollars. Yet despite these facts, we have too many who keep seeking a solution for a problem that simply isn't there.
What have the regulatory bodies found in their investigations as we look for somebody to blame? There have already been studies and investigations into whether excessive speculation is manipulation and they are manipulating prices. Let's take a look at what they found.
Last year, a Federal Trade Commission report on manipulation of gas prices determined that none of the complaints investigated violated any FTC rules.
A similar study by the CFTC stated that its preliminary analysis ``does not support the proposition that speculative activity has systematically driven changes in oil prices.'' Last but not least, the administration's own Financial Fraud Enforcement Task Force set out to investigate illegal speculation in the energy markets. To date, it has found none.
The effects of high gas prices on our economic growth and on each individual business and family are certainly well understood. We should be finding effective solutions to fix a failed Federal energy policy rather than trying to place the blame where it does not exist.
These solutions do not stop at increased domestic oil and gas production. They include implementation of workable environmental regulations. Unfortunately, the multitude of regulations under this administration is anything but workable.
They are like a Katrina flooding virtually every part of the economic sector. That is all I hear about when I go home to Kansas. There are a lot of things that are on people's minds, but regulation is No. 1, and I don't care what sector of the economy we are talking about. There is a very real fear in my State that the new clean air regulations we are hearing about targeting coal-fired powerplants could disrupt our power grid. In a State that relies on coal for 75 percent of our power, this is simply unacceptable.
Yes, let's continue moving toward cleaner forms of energy--certainly we want to do that--but in a way that will not compromise the ability for Kansans or any citizen of any State to access affordable energy. This includes impending Federal regulations on hydraulic fracturing, which will continue to play a huge role in my State's energy economy.
In closing, on a larger topic of domestic energy companies, I think it is unfortunate for elected officials to come to the floor--or for that matter make a speech anywhere--and single out specific industries or private U.S. citizens, for that matter, that employ millions of Americans and blame them for our energy woes. I think we are better than that.
Let's remember that attacking their profits is an easy target. It is not going to hurt the few top-level executives at these companies, but it will hurt middle-income Americans and retirees who make up over 90 percent of the ownership of so-called Big Oil or so-called big anything, and rely on their IRAs, pension funds, and mutual funds for their very livelihood. These are not privately held companies, so let's remember who actually owns the companies. It is our constituents, that is who it is.
I yield the floor and suggest the absence of a quorum.