Klobuchar Wants Action To Limit Gas Price Increases
Edgar Linares of NewsRadio 830 WCCO contributed to this report.
MINNEAPOLIS (WCCO) -- At a news conference Monday, Sen. Amy Klobuchar called upon the U.S. Commodity Futures Trading Commission to limit excessive price speculating in the oil futures market.
"Today I'm writing to Gary Gensler, the head of the commission that oversees Wall Street speculation in the Oil Market," said Senator Klobuchar. "I'm calling for swift and strong implementation of the provisions of the Wall Street Reform Act."
The Dodd-Frank Wall Street Reform Act was passed last year. It authorizes the Commodity Futures Trading Commission to rein in excessive speculation on hedge funds, investment banks and other financial entities. The act, however, does not rein in speculative contracts on oil futures.
Klobuchar says by not limiting these speculative contracts, the price of a gallon of gas could peak as high as $4.00 a gallon, similar to that of 2008.
"A lot of this has to do with people playing games with financial speculation with the oil market," said Klobuchar. "It's not the only factor, but high fuel prices is one of the reasons we went into the worst economic downturn that we had seen since the great depression. We don't want this happen again."
"This isn't about legitimate companies that are hedging their bets by buying fuel, say like Delta Airlines, that's not what this is about," said Klobuchar. "This is about hedge funds and financial speculators that get out there and play games."
David Morris keeps a close eye on oil prices and policy in his job co-directing the Institute for Local Self-Reliance. He explained what happened in 2008.
"We saw the price of oil go from something like $50 a barrel to $140 a barrel," said Morris. "And it was not because there was a supply shortage. It's because you had massive speculation that occurred. Speculators have come in, and they're essentially gambling on the price. As more and more money goes in, betting that the price will go up, the price does go up."
Morris is keeping a close eye on what's happening in Japan.
"This is a fascinating situation of supply and demand, and right now we see that demand is plummeting," said Morris. "The economy has collapsed, because as you saw thousands, if not tens of thousands of cars have been thrown out of the highway, the highways themselves have now buckled, so there will be much less demand for gasoline."
Morris expects prices to jump like they always do going into the summer driving season. However, he doesn't expect much of an extra jump due to what's happening in Japan.
"So I can't imagine that the gasoline prices are going to go down," he said. "But I also don't really think that the gas prices are going to go up that much."
There are some prices he expects to rise, like cars and rice. In the wake of the devastating tsunami, Morris says the country will be able to produce and export fewer vehicles and less rice.
Klobuchar serves on the Senate Agriculture Committee, which oversees the Commodity Futures Trading Commission.
Paula Engelking, Producer
