Can Congress Give Us $2 Gas?June 26, 2008 - by Donny Shaw
A proposal aimed at lowering gas prices is picking up bipartisan support in Congress. It’s not the summer gas tax holiday or opening up ANWR to drilling, but an increase in regulation of the speculators that now dominate the energy-futures market. At a hearing on Monday, energy analysts told Congress that if legislation to limit speculation in energy-futures markets was enacted, gas prices could go down by as much as 50 percent within 30 days.
. Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.
>Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters’ assessment at a hearing on proposed legislation to limit speculation in futures markets.
>Krapels said that it wouldn’t even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in
>"Record oil prices are inflated by speculation and not justified by market fundamentals," according to Gheit. "Based on supply and demand fundamentals, crude-oil prices should not be above $60 per barrel.
A handful of bills designed to curb energy speculation have been introduced into Congress lately. For example, John Dingell’s (D-MI) bill, which has the support of Joe Barton (R-GA), the top Republican on the House Energy and Commerce Comittee, would create a working group to develop policy recommendations. Bart Stupak’s (D-MI) bill would close the infamous “London Loophole,” that currently allows U.S. traders to execute transactions outside the Commodity Futures Trading Commission’s regulation. Other proposals include a 50 percent margin requirement on speculators and prohibiting investment bankers from dealing in energy assets.
At this point, it’s unclear what approach they will take. But with expert testimony alleging the possibility of $2-a-gallon gas, Congress will no doubt be acting on this when they get back from July 4th recess.