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Rep. Cummings: Curbing Speculation 30 Times as Likely to Bring Down Gas Prices as More Drilling

The House Oversight Committee held a hearing on gas prices today, and things got a little heated:

Rep. Elijah Cummings (D-Md.), the top Democrat on the panel, accused Committee Chairman Darrell Issa (R-Calif.) of suggesting that a top Interior official was lying under oath at a hearing on the effect of the administration’s regulations on gas prices.

Issa cut off Interior Deputy Secretary David Hayes after asking about litigation regarding the Obama administration’s moratorium on deepwater drilling in the Gulf of Mexico, which the Interior Department lifted last year.

“We’ll move on because I don’t want you to say anything that ultimately will be bad considering you’re under oath,” Issa, who swore in the administration witnesses before the hearing, said.

Cummings said Issa’s comment was akin to accusing Hayes of lying.

“You basically implied that this gentleman may be lying,” Cummings said.

“The gentleman should be afforded the opportunity to answer the question. This is about the integrity of this committee. I am not going to allow people who come in here to be called all kinds of names and not be treated fairly.”

This was just one of those petty comments, similar to Patrick McHenry accusing Elizabeth Warren of lying today. But Democrats have a real argument to make on gas prices, and Cummings has actually managed to do it. This report on the role of speculation in high gas prices is first-rate, and makes the clear case that Americans are overpaying at the pump by about 30% because of rising speculative commodity trading.

The report’s chief conclusion is that, in order to make the most significant impact on lowering gas prices, the Committee’s primary focus should be on countering the growing impact of excessive speculation, rather than pursuing the oil industry’s priorities of increasing domestic drilling or repealing safety measures put in place after the devastating BP oil spill. Experts estimate that excessive oil speculation could be inflating prices by up to 30%, while increasing domestic drilling would impact prices by only about 1%, and then only after a decade or more. Addressing excessive speculation offers the single most significant opportunity to reduce the price of gas for American consumers […]

According to the U.S. Energy Information Administration, the price of oil has been hovering around $100 for some time. Industry officials, regulators, and outside experts have determined that these prices are artificially high in part due to the increasing role of energy speculation in the futures market. They estimate that excessive speculation may be inflating prices by up to 30%.

On May 12, Rex Tillerson, the CEO of ExxonMobil, testified before the Senate Finance Committee. When asked by Senator Maria Cantwell how much a barrel of oil would cost without excessive speculation, he responded, “Well it’s pretty hard to judge but it would be, you know, when we look at it, it’s going to be somewhere in the $60 to $70 range.” Similarly, on April 11, Goldman Sachs warned its investment clients that speculators may be inflating the price of oil by as much as $27 a barrel.

This is the proper response to “Drill Baby Drill.” There’s a certain satisfaction in ending the corporate welfare that are fossil fuel subsidies, and because they distort the market and allow oil and gas industry to increase their political economy they have to go. But if you want to talk about gas prices, stopping Wall Street speculators (now 70% of the market) from artificially trading up the price of oil would have 30 times the impact of increasing domestic drilling. This is just a fact.

The CFTC is well-positioned to implement Dodd-Frank provisions that would set position limits and raise margins to stop the overspeculation in commodities, including oil. But The House GOP budget would reduce funding for the CFTC by 15%, limiting their ability to stop speculative trading.

I like the terrain that Cummings is trying to move the conversation to, at least. We’ll see if he’s successful.

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David Dayen

David Dayen

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