Hill to push for tighter regulations on oil speculators

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Rep. Baron Hill

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August 26, 2008

By DANIEL SUDDEATH The News and Tribune Tue Aug 26, 2008, 10:33 AM EDT

Rep. Baron Hill, D-Ind., plans on pushing stricter regulations for oil speculators when Congress reconvenes in September.

The idea of cracking down on oil speculators may sound like “Washington speak,” but the congressman feels it could result in lowering prices at the pump for the short-term, said Katie Moreau, communications director for Hoosiers for Hill, his campaign organization.

“What Baron wants to see happen is his bill enacted to put back regulations that were taken out in 2000,” Moreau said.

The basis of a measure Hill is pushing — which Moreau said will be supported by several other Congress members and will be presented to Speaker of the House Nancy Pelosi next month — is that speculators are artificially driving up the price of oil based on a presumed shortage.

Hill wants trade to occur on a “more equal playing field,” according to Moreau. She said Hill’s plan would be aimed at fixing loopholes in current legislation that allows speculators to basically trade paper or a minimal amount of money for oil.

“It’s not like they have to put down a significant amount of money (for trading),” Moreau said.

Better oversight of the Commodity Futures Trading Market would allow prices to be dictated by supply and demand, which Hill feels would lower gasoline costs.

“Hopefully, that will send a message to say ‘hey, you guys are going to stop doing this,’” Moreau said.

But Hill’s contenders for the 9th District seat disagree.

Republican Mike Sodrel said traders on the futures market are basing their speculation on what they think is going to happen. Many transportation companies buy into futures so they can control oil costs, Sodrel said.

As long as the U.S. is dependent on foreign oil, Sodrel believes gas prices will remain unstable.

“We need more wind energy, we need more solar energy, we need more water energy and we need more renewables,” Sodrel said. “We need the whole spectrum of energy if we’re going to become independent.”

Libertarian candidate Eric Schansberg said speculation is a non-issue at best.

“I don’t know if Hill or the average democrat really believes this is the case, or if this is just a cover to avoid drilling,” Schansberg said. “To me, it’s a distraction.”

Schansberg said the driving forces for gas prices are drilling and the value of the dollar, with the latter being the most important.

A stronger dollar typically makes oil less attractive to investors who buy commodities as a hedge against inflation and weakness in the U.S. currency, according to an Associated Press report.

“You have to assume that the markets are really, really flawed to have the kind of price impact they are talking about,” said Schansberg, an economist. “Trying to argue that (oil speculation) is a really big thing, for me it’s impossible to imagine.”

As far as traders putting up paper for deals, Schansberg said changing that policy would require speculators to agree to physical delivery of oil.

He said regulating trade to that extent could do more harm than good.

“You would knock out so many investors,” Schansberg said.

Hill is not basing his approach to gas prices solely on tighter regulations for oil speculators, Moreau said.

“(Hill) wants to stress to people we have to get ourselves off of foreign fuels,” she said.

While Sodrel doesn’t feel domestic drilling is the only facet to a solution, he believes it has to be part of it. He added Pelosi and Congress seem to only be interested in raising taxes, regulation, investigation and filing lawsuits.

“We’re going to have to increase the supply (of oil) — we can’t just file lawsuits and regulate and investigate and tax,” Sodrel said.

The candidates do agree that gas prices are driving the race. Hill has scheduled a discussion on the topic for Sept. 5 at Indiana University Southeast.

To reserve a space for the event, call his Jeffersonville office at 812-288-3999.