Senate Republican Leader Mitch McConnell (R-Ky.) held a conference call to discuss America’s need for a balanced and bipartisan energy plan. McConnell said that energy is the most important subject in the nation right now. He explained that in order to fix the energy problem, the U.S. needs to “find more and use less.” McConnell explained that the new bill addresses only a small part of the overall issue, speculation, and this act alone will not get the job done. He wants Congress to make a more serious effort in addressing the problem. (more…)

The House Committee on Agriculture met to discuss the Commodity Futures Trading Commission (CFTC) and its role in monitoring oil prices. Rep. Jeff Moran (R-Kan.) said that speculation is a component of high oil prices but that speculation is being used as a scapegoat and preventing Congress from addressing other important issues.

Walter Lukken, acting chairman of the CFTC, said that the CFTC launched an investigation in December 2007 to monitor the oil prices, realizing that enforcement and regulation is imperative to the industry. According to Lukken, the CFTC has found that the cost of oil properly reflects supply and demand, adding that the CFTC is unable to find evidence supporting claims that speculation is driving up prices at the pump. Lukken said he welcomes evidence showing why oil prices should be lower than they currently are.

Lukken also said that the CFTC is able to monitor a complex market despite being understaffed. He stated that the CFTC has asked for $27 million dollars in order to increase its staff to historical levels. Lukken told the committee that the CFTC has seen an 8,000 percent increase in activity and will be unable to sustain itself without additional employees.

Lukken expressed support for the Farm Bill, saying that the CFTC is working to comply with it and asking Congress to allow its implementation before revising it. Lukken also said he is confident that the Farm Bill has closed the “Enron Loophole,” a loophole that allows for exchanges made electronically to circumvent US regulation.

In his weekly pen and pad briefing, House Majority Leader Steny Hoyer (D-Md.) said that Democrats are supportive of using U.S. products to combat the rising oil prices. He said the most viable option, drilling in federal land and water, was still opposed by Republicans who want to drill offshore or in the Arctic National Wildlife Refuge (ANWR). He said that there are 68 million acres of federally owned land in the U.S. and this land shelters 107 billion barrels of oil and 658 trillion cubic feet of natural gas.

Hoyer said the only tool to lower gas prices in the near future is to try and control oil speculation. He told the press that his oil experts said that production cost was not really the driving force behind the colossal rise in gas prices, but that speculation accounted for between 20 and 50 percent of rising gas prices. He said that drilling ANWR would completely ignore the substantial supply already available in federal land.

He said that President Bush has done nothing to encourage conservation since taking office. Hoyer said that the Republicans may want oil prices to go down but instead of taking action he said they just offer subsidies to oil companies. He said that Senator McCain’s (R-Az.) new plan to develop an electric car was created to balance out the four billion dollar tax cut he proposed for the five largest U.S. oil companies.

The role of market speculation and its effect on the dramatic increases in the price of oil was discussed by the House Energy and Commerce Committee’s Oversight and and Investigations Subcommittee. Rep. Michael Burgess (R-Texas) stated that the American economy will not be sustainable if high prices at the pump continue to climb.

Rep. Jay Inslee (D-Wash.) said a solution to inappropriate speculation would help to lower prices in the short term, contrasting this idea with calls to increase supply by drilling in the ANWR. Inslee said that these measures would affect future generations but have no immediate result now. Rep. Bart Stupak (D-Mich.) stated that speculation of future demand for oil has played a large role in oil’s price increase and that one can solve the issue of high prices by traveling to New York or Chicago.

Rep. Joe Barton (R-Texas) said the cost of oil can be attributed to low supply, not market speculation. Barton suggested opening the Strategic Petroleum Reserve and selling two million barrels each day. Barton said this would return oil prices to under $100 per barrel. He noted that the Bush administration opposes this strategy and that its success would rely on an act of Congress. Rep. Greg Walden (R-Ore.) said supply and demand principles, as well as deflation and market forces cannot be ignored.

Michael Masters of Masters Capital Management said that investment firms are good at making profits but ignore the long-term consequences of their decisions, naming the subprime mortgage crisis as an example. Inslee recalled being told by Vice President Dick Cheney that he did not understand economics when he presented Cheney with information concerning Enron, comparing that experience with what he views as the Bush administration’s refusal to acknowledge the effect of futures markets on oil.