Members of the coalition to stem oil speculation renewed efforts to get Congress to pass legislation this year, according to a letter sent to House and Senate leaders yesterday. Both chambers have introduced a number of bills addressing commodity volatility and the coalition urged Congressional leaders to resolve differences to pass “strong and comprehensive” legislation to “restore confidence in our commodity markets.”

In the meantime, Vermont Senator Bernie Sanders called on regulators to rein in speculators. Sanders wants the Commodity Futures Trading Commission to impose speculation limits, suspend trading and increase margin requirements by using its emergency powers. In a letter to CFTC Chair Gary Gensler, Sanders, who cited Goldman Sachs and Morgan Stanley as major oil speculators, wrote, "The failure of the CFTC to take strong steps to limit speculation was one of the contributing factors to the current financial crisis, and played a significant role in precipitating not only the present economic recession, but also the largest taxpayer bailout in the history of the world."

“This coalition remains concerned that inadequate oversight of the commodities markets and excessive speculation will continue to erode public confidence in the ability of these markets to establish fair prices for energy, agricultural products and other commodities that are reflective of market fundamentals,” said the coalition, now numbering more than 250 members, in calling for Congressional action. “We urge Congress to act decisively to bring full transparency to all trading environments and platforms, to prevent excessive speculation, and to close the door to potential manipulation.”

The action comes as oil prices are making its seasonal rise and Sanders noted that crude rose 70 percent to $65 per barrel since mid-January. "The only problem with that argument right now is that according to the latest data crude oil inventories in the United States are at their highest levels on record," Sanders told the Rutland Herald. "And in terms of demand, we are in the midst of a major recession, an international recession, and in the United States demand has dropped to its lowest level in more than a decade." He noted that the International Energy Agency predicts global demand will drop further to levels not seen since 1981.

“In recent weeks, energy commodities including natural gas, crude oil and refined petroleum products have been trading substantially higher despite record inventories and low demand,” said the coalition. “Internationally, some predict a tight food commodity market in the year ahead. According to a recent Barclays Capital survey, 79 percent of investors plan to increase holdings in these markets."

The group reminded Congressional leaders that hearings “revealed that inadequate or non-existent oversight of off-shore and over-the-counter (OTC) markets, ineffective oversight of on-exchange participants and activity, and an under-funded and under-staffed CFTC had opened-the-door to excessive speculation and opaque trading activity.” The coalition is especially concerned over those in the market for speculation rather than those who expect to actually take delivery of fuel.

“We again urge the Congress to pass strong new legislation to restore our confidence in these markets as a risk management and price discovery tool for bona-fide commercial players,” said the coalition. “Congress has taken some positive steps in the right direction, including last year’s CFTC Reauthorization Act, which returns to the CFTC some authority over exempt commercial markets it had lost under the ‘Enron Loophole’ in 2000. Appropriators have steadily increased CFTC funding levels in recent years to allow for much-needed staff, resources, and technology investments and we commend the President’s FY2010 budget request of $161 million.

“But absent strong and sweeping reform,” it continued, “we will continue to witness extreme price volatility and excessive speculation. Trading will continue to grow in ‘dark’ or unregulated markets and investment speculators will continue to elude federal oversight, data reporting requirements and position limits. Families, businesses, farmers and laborers at home and abroad will continue to pay the price in many ways.”

Founder and CEO of Kanundrum Inc. Brian Kelly sees a silver lining in rising crude, despite predictions that passing the $65 level will derail recovery. Writing on Seeking Alpha, he said that $50+ oil prices takes political and social unrest in the Middle East and Central America off the table.

“Most of the Gulf States have based their previous budgets on oil above $50 a barrel,” he said. “When oil dipped below this level, many countries, including Iran were forced to cut expenditures. The fastest way to derail economic recovery would be to have political and social unrest in Iran. Mexico has also been labeled a dangerous state with the potential for rapid collapse.” He pointed to the fact that the Mexican government is losing its drug war citing that oil revenues amount 30% of the government’s budget.

“Additionally, oil at the higher end of the range ($75) makes exploration and alternative energy a profitable venture. Certainly, higher gas prices will crimp consumer spending and is why we see oil above $75 a barrel as detrimental to the economic recovery. There is a delicate balance between stability and recovery.”

The coalition wants Congress to approve legislation that will:
• Address market activity for all commodities, including energy, agriculture, livestock and metals;
• Fully close the “Enron Loophole” by requiring that large over-the-counter trades comply with data reporting requirements and are made subject to speculative position limits;
• Close the so-called “Foreign Markets Loophole” or “London Loophole” by requiring the presence of foreign regulators with comparable oversight in order for an off-shore exchange to obtain regulatory exemptions (i.e., no-action letters);
• Close the “Swaps Loophole” by limiting hedging exemptions to bona-fide commercial participants and requiring that swap traders, index funds and institutional investors comply with all CFTC speculation limits and data reporting requirements;
• Limit exchange traded fund investments in physical commodities and their derivatives;
• Require across-the-board aggregate speculation limits to prevent traders from taking a controlling position in a commodity by taking large positions on multiple platforms;
• Require the CFTC to review all current regulatory exemptions and require Commissioners to withdraw them as appropriate or in accordance with existing or new authorities granted by Congress;
• Require a thorough review of all new and existing rules and regulations designed to protect market users and the public from fraud, manipulation and excessive speculation, including position limits, margin requirements, data reporting requirements, and public availability of data; and
• Require a thorough review of emerging environmental markets, emissions trading and related Wall Street products and instruments, including derivatives, index funds and exchange traded funds.

Overnight News
Frequent flier upgrades on United — the clock is ticking

LOT launch charter division

Airline Traffic Results for May: Is This the Bottom?

UPDATE 2-Air Berlin to raise capital with share issue

Cathay CEO Says Cargo Business Steadying

Flight price and convenience most important for flyers say Skyscanner users

Seattle judge orders Expedia to pay consumers $184m.

Fly Montserrat begins operations

Air Europa now gives passengers more for their money

JetBlue ups shares sale, sells stake to Lufthansa

Are Defense and Aerospace Stocks Good Stocks to Own?

Kingfisher chairman expands personal guarantee for debt payment

America and Australia’s Award Winning “Virgin’s” Team Up

Emirates in Dh11b deal on A380 maintenance

Why Woolworths & Qantas hope you don’t count the cost of ‘free flights’ from buying groceries

Emirates Airline calls Canada's landing restrictions 'ludicrous'

WestJet 'not bullet-proof'

Will Airbus announce bad news this month?

Airlines Are at It Again: Less Legroom

Airlines jostle for New York fliers as consumers cut back

Boeing 787 Dreamliner engine test with smoke (video)

Thailand's aviation fuel provider projects volume dropping 6% in 2009

Ohio man wins relief in airplane bathroom crisis

LAN Fleet Undergoes Upgrade

Angry Flyers Lounge-CASA is fixing the poor state of air safety in far northern Queensland

Do passengers like to pay all the new airline fees?

Michael O'Leary in his own words

Employment data reflect Boeing's slimming workforce

Kenya Summons US Envoy Over Delta Flights

Survey: Delta, Singapore on Top

The road ahead for business travelers

Seven announces new airline reality show

Salary revised for Air India officers’ grade cabin crew

ABCNews.com - Those $9 Airfares - Too Good to be True?

The queen, the losses and the disappearing toilets

FedEx expects to take $1.2B in fiscal 4Q charges

Delta called 'last best chance' for better air service in Nebraska capital

House Passes FAA Reauthorization Bill of 2009

Flight 447 News
Spanish pilot adds to Air France clues

Air France received bomb threat days before 447 crash

Air France flight 447 broke apart 14 minutes after pilot signal

We need broadband on planes - like now

Speculation in tatters

How can an airline brand survive a disaster? Lessons from the Air France 477 crash

Flying Into Storms To Be Avoided - Pilots

Air France jet 'may have exploded mid-air

Why satellites didn't find missing plane

Some Answers and a Comment