Sens. Cantwell, Feinstein, Wyden tell FTC to investigate trading practices behind suspicious West Coast pump prices
Today, Senator Maria Cantwell (D-Wash.), Chair of the Committee on Commerce, Science, and Transportation, led a hearing that underscored the need for action to ensure transparency and greater oversight of petroleum markets in order to protect consumers from possible price manipulation. Cantwell also sent a letter along with Sens. Dianne Feinstein (D-Calif.) and Ron Wyden (D-Ore.) asking the Federal Trade Commission (FTC) to investigate whether trading practices used to set benchmark prices may have played a role in artificially elevating wholesale petroleum prices in California, Oregon, and Washington.
“In the state of Washington, many of my constituents are still paying close to $5 a gallon at the pump, even though [oil] prices have fallen 11% last month,” Sen. Cantwell said in her opening statement. “Americans have the right to know why one of our most important commodities doesn't have the right amount of proper transparency and oversight.”
The hearing comes as sky-high gasoline and diesel pump prices, and wide disparity in pricing along the West Coast, have exposed how little is known about how gas prices are set in the petroleum markets despite their profound impact on the U.S. economy and household budgets.
“It doesn't seem right to me that we should have more transparency on a product like wheat or corn than we would on oil,” she added. “This hearing is about this mysterious middle of the supply chain, how we can shine a light on the black box to expose any anti-competitive dark trading, making sure there aren't a bunch of smartest guys in the room hurting consumers because they think we can't figure out what is happening when there is a lack of transparency.”
Sen. Cantwell drew parallels to the Enron crisis in which it was uncovered that the company’s trading schemes were responsible for the West Coast energy crisis.
“And during the Enron crisis, a lot of people have blamed it for a long time on environmental issues,” she said. “They kept saying it's all about environmental issues when in reality, it didn't turn out to be about environmental issues. It turned out to be about a lack of transparency and energy traders who took advantage of schemes to manipulate supply.”
Testifying at the hearing was energy expert Robert McCullough who helped uncover Enron’s role in the energy crisis. He explained that indices used to price petroleum contracts across the West Coast market are based on transactions that are not monitored or understood by the Federal Trade Commission (FTC), which is responsible for oversight of the market and protecting consumers from artificially inflated pump prices.
Pointing to congressional action taken in the wake of the Enron scandal to ensure transparency in the electricity and natural gas markets, McCollough, explained: “There is however, one gaping hole. That gaping hole is spot oil, spot gasoline, those do not have a clear assignment.”
“My opinion is we now need to do the same thing on opaque petroleum markets,” Sen. Cantwell said.
In the aftermath of Enron’s energy trading schemes, Cantwell authored an amendment to the Energy Policy Act of 2005 that greatly strengthened the Federal Energy Regulatory Commission’s (FERC) authority to investigate and punish energy market manipulation.
Since then, FERC has built a permanent cadre of internal energy experts that continually monitor and investigate anomalous market trends and suspicious behavior. These policemen on the beat have uncovered numerous exploitive schemes, to date approving 127 settlement agreements and assessing over $790 million in civil penalties and disgorging over $521 million in illegal profits.
Throughout her public service career, the Senator has sought to get to the bottom of oil market discrepancies that hurt consumers. After years of efforts, in 2007 Cantwell successfully got enacted two milestone new laws to better police energy markets, including making it a federal crime to manipulate wholesale oil markets.
Read the senators’ letter to the FTC here.