US legislation would crack down on oil speculators

By Tom Doggett

WASHINGTON, June 10 (Reuters) - In response to soaring crude oil and gasoline prices, a U.S. senator on Wednesday introduced legislation to force the federal futures market regulator to use its emergency powers to stop market speculators from pushing up energy costs.

The price for crude oil hit almost $72 a barrel on Tuesday, more than doubling from levels earlier this year. The higher oil costs have been passed on to consumers at the pump, where gasoline prices have jumped 60 cents gallon since the beginning of May.

Sen. Bernie Sanders (I-Vermont) said the rise in prices is not justified because petroleum demand is down sharply from last year due to the recession and fuel inventories are plentiful.

"Despite the record supply of oil and reduced demand, prices are going up, not down," he said.

Sanders blamed the spike in energy prices on market speculators.

"The last thing people need now is to be ripped off at the gas pump because speculators on Wall Street -- some of the same people who received the largest taxpayer bailout in U.S. history -- are allowed to jack up oil prices through price manipulation and outright fraud," he said.

Sanders' legislation directs the Commodity Futures Trading Commission, which oversees futures markets like the New York Mercantile Exchange, "to stop sudden or unreasonable fluctuations or unwarranted changes in prices."

The bill would also limit the number of oil and gasoline futures contracts that a bank holding company engaged in energy trading could control.

Hedge funds that trade in the energy market would also be subject to strict contract speculation limits and would have to register with the CFTC.

Sanders introduced his bill after he wrote to new CFTC chairman Gary Gensler two weeks ago, asking that the agency crack down on speculators.

CFTC Commissioner Bart Chilton is backing Sanders' call to action. "I wholeheartedly agree with you that the time to act on these issues is now, and the CFTC should aggressively utilize all available authorities...to address these pressing issues," Chilton wrote to Sanders. (Reporting by Tom Doggett; Editing by John Picinich)