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An Open letter to All Airline Customers:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
The nation needs to pull together to reform the oil markets and solve this growing problem.
We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com. |
I received the following email from Senator Kay Bailey Hutchison in response to this topic:
Dear Mr. Gallimore:
Thank you for contacting me regarding the energy futures market. I welcome your thoughts and comments on this issue.
Today, a barrel of oil is more expensive than it has ever been. This is causing the price of gasoline and diesel at the pump to reach unprecedented levels. Some feel that speculative trading in the energy futures market accounts for a large portion of this increase. I believe that speculative activity may be playing some role in price increases, but the exact extent is uncertain.
In order to address these concerns, Senate Republicans have proposed the Gas Price Reduction Act (GPRA). Provisions in this Act aim to increase oversight of the energy futures market to ensure its proper and legal functioning. The Commodity Futures Trading Commission (CFTC) is the federal agency tasked with oversight and regulation of energy futures markets. To help the CFTC investigate the extent of the role of speculators in the market, the GPRA will increase the resources of the CFTC by adding 100 full-time employees devoted to this task.
The ability of the overseas markets to possibly manipulate world oil prices is also a concern addressed by the GPRA. Specifically, this bill puts requirements on these foreign boards of trade that wish to access U.S. markets. These requirements include publicizing monthly information on the positions of traders in these foreign energy futures markets to minimize the potential for manipulative activity. While I feel that these provisions could help shine some light on energy futures markets, I feel that the most effective way to address rising gasoline and diesel prices is to address the supply of oil.
Other provisions in the GPRA aim to do just that. In particular, this bill would lift the congressional moratorium on deep-sea oil and natural gas exploration by allowing states to explore for these resources at least 50 miles off their coasts. Estimates from the U.S. Minerals Management Service show that lifting this moratorium will increase our domestic supply of oil by an estimated 14 billion barrels from the Pacific and Atlantic regions of the Outer Continental Shelf. The GPRA would also allow for domestic production of shale oil in Wyoming, Utah and Colorado. Estimates show that these shale resources could exceed 1.5 trillion barrels of oil equivalent.
By enacting this legislation, we can ensure that the U.S. fully develops its domestic energy resources to wean ourselves from foreign sources of energy and drive down the price of gasoline and diesel at the pump.
I appreciate hearing from you and hope you will not hesitate to keep in touch on any issue of concern to you.
Sincerely,
Kay Bailey Hutchison
United States Senator
284 Russell Senate Office Building
Washington, DC 20510
202-224-5922 (tel)
202-224-0776 (fax)
http://hutchison.senate.gov
PLEASE DO NOT REPLY to this message as it is not a valid e-mail address. Due to the tremendous volume of mail Senator Hutchison receives, she requests that all email messages be sent through the contact form found on her website at http://hutchison.senate.gov/contact.cfm .
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Thank you.