Eight senators press regulators to implement strict rules on speculation

Eight senators are urging regulators to maintain strict rules against excessive speculation by investors in oil and commodities markets to avoid sudden price hikes. 

The lawmakers cautioned the Commodity Futures Trading Commission (CFTC), charged with determining the limits on the amount of speculative investments in oil, wheat and other commodities under the Dodd-Frank Act, not to be swayed by arguments from the financial sector to delay or approve less restrictive rules. 

With oil and food prices again on the rise, Sens. Bill Nelson (D-Fla.), Maria Cantwell (D-Wash.), Carl Levin (D-Mich.), Robert Menendez (D-N.J.), Patty Murray (D-Wash.), Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.) and Ron Wyden (D-Ore.) sent the letter to "ensure federal regulators act quickly to rein in Wall Street excesses and prevent another speculative bubble that threatens to drive up gas and food prices even further for working Americans. "

"It has become increasingly clear that Wall Street seeks to use the rulemaking process to eviscerate the new position limits," the lawmakers wrote in a letter to the CFTC on Wednesday ahead of a Thursday CFTC meeting. "We urge you to reject calls to delay the new rules."

The law directs that the speculation limits be set "to diminish, eliminate, or prevent excessive speculation," the letter said. 

Speculation in commodity markets has contributed to the volatility and periodic price spikes of oil and basic food staples, the lawmakers argued. An example cited in a press release stated that an influx of speculative investment helped drive the price of oil to $145.31 in June 2008; it hit low of $30.28 just six months later.

In recent years, Nelson and Cantwell have offered several measures intended to prevent manipulation and reduce excessive speculation in commodity markets.  

Nelson authored legislation to close the “Enron loophole,” which allowed energy derivative trading firms such as Enron to operate without transparency or regulatory oversight. 

Cantwell proposed a bill to enable regulators to prevent and combat manipulation in commodity markets.