The political consequences of $4-a-gallon gasoline continued to be evident Friday as three senators detailed a plan to curb the latest consumer villain: rampant speculation in the futures market blamed for artificially inflating oil prices.

Sens. Joe Lieberman (I-Conn.), Susan Collins (R-Maine) and Maria Cantwell (D-Wash.) said the new effort would add regulatory heft to existing restrictions by closing loopholes that have allowed a dramatic increase in institutional investor participation in oil and other commodity markets.

At a news conference, Lieberman said his committee’s investigation had determined that “speculation in the commodity markets is contributing to the awful spikes in prices American are paying today for both fuel and food.”

The bill would set limits on how much an individual can invest in futures markets, called position limits.
Under the bill, the Commodity Futures Trading Commission (CFTC) would set position limits “no greater than necessary to ensure sufficient market liquidity for bona fide hedging activities by what we call physical traders: the farmers, the fuel dealers and the like,” Lieberman said.

Exchanges now set their own position limits, but the bill would transfer that authority to the CFTC.

The bill would also provide more money to the CFTC to hire 100 new employees.

Collins said other factors underlie the sharp rise in oil prices, namely rapid demand growth in places like India and China and a weak dollar. But “speculation contributes to the high cost,” she said.   

“Our goal is to have futures markets that are transparent, competitive, an even playing field, and effectively policed, and that’s what I believe that our legislation will do,” Collins said.

She noted that total value of noncommercial investor futures contracts and commodity index fund investment has increased from $13 billion to $260 billion.

“The fact is that their enormous holdings are driving up the cost for all consumers,” Collins said.