By Senator Susan Collins
Soaring oil and gas prices are placing a heavy burden on Maine families, truck drivers, farmers, fishermen, schools, small businesses, mills and factories. In just the last six months, the price of regular gasoline here in Maine has increased by about one dollar to a statewide average of around $4 per gallon.
The average price of home heating oil is $3.60 per gallon, with plenty of chilly nights still to come.
Some regions have been hit especially hard: in Aroostook County, the price per gallon of regular gas has reached $4.20. And people throughout our state have seen the effect of rising transportation costs whenever they buy groceries or other goods.
Several factors are driving the spike in energy prices. According to the U.S. Energy Information Administration, a weaker dollar, manufacturing growth in China and a cold winter have pushed up the price of crude oil and heating oil. Another significant factor is international instability, such as the unrest in the Middle East and North Africa.
One factor of particular concern to me, which I’m working to address, is excessive speculation in crude oil futures and other energy commodities. Numerous experts have concluded that this speculation in oil futures is causing price volatility that is unrelated to supply-and-demand market fundamentals.
During the oil price spike of 2008, and again in 2009, I introduced legislation to help guard against excessive speculation in oil futures markets. The Wall Street Reform Act, which passed last July with my support, requires the U.S. Commodity Futures Trading Commission (CFTC) to develop such safeguards.
Unfortunately, the CFCT has yet to take action, much to the detriment of the American people. This regulation is long overdue: the Wall Street Reform Act required the commission to implement effective rules by last January to diminish, eliminate or prevent excessive speculation in energy commodities. But they missed that deadline.
Recently, I joined 16 of my Senate colleagues in calling on the commission to implement immediately rules to control speculation in all energy futures, beginning with crude oil. Our bipartisan Senate coalition has asked to see the commission’s plan no later than May 23.
Futures trading plays an important role in helping commodities producers and purchasers mitigate risk. A contract market dominated by speculators, however, turns this legitimate public purpose into a casino-like atmosphere. Speculating consists of escalating bets on future prices, which is unrelated to today’s supply-and-demand principles, so that there is constant upward pressure on the prices of vital commodities.
It is estimated that each million barrels of oil controlled by speculators adds as much as 10 cents to the price of a barrel. As of the beginning of May, speculators held positions in U.S. crude oil contracts equivalent to a near-record 258 million barrels, thus contributing about $25 to the current price per barrel of around $100. Speculators, oil companies and the countries from which we import oil all profit at the expense of hardworking American families and businesses. The rules we are calling for will help prevent the market distortion that now is contributing to soaring prices.
This immediate step to better regulate trading in energy futures must be accompanied by a commitment to secure our nation’s energy future. Although the United States has imported less foreign oil in recent years, dropping from 60 percent in 2005 to 49 percent in 2010, we still are subject to volatile global market factors that help drive up prices.
The current political turmoil throughout the Middle East and our reliance on oil from countries with which we have strained relations, such as Venezuela, remind us that decreasing our nation’s dependence on foreign oil must be the cornerstone of our nation’s energy policy. While we need to continue efforts to develop alternative sources of energy and conserve energy, we must also increase our domestic production of oil to address our short-term challenges and rising energy prices.
I have voted to open 8.3 million acres in the Gulf of Mexico to oil and gas drilling. I am also encouraged by potential leasing in the Western and Central Gulf of Mexico, the Cook Inlet and the Chukchi and Beaufort Seas in the Arctic.
Another way to decrease our dependence on foreign oil is to promote energy efficiency and develop viable and affordable domestic alternative energy sources. I have worked to advance these goals by sponsoring legislation that would promote clean-energy initiatives, such as accelerating research of plug-in hybrid technologies for heavy-duty trucks; providing incentives for producing alternative fuels from biomass; improving the energy efficiency of motor vehicles and appliances; and supporting the research and development of deepwater offshore wind power, an emerging industry with the potential to create thousands of good jobs right here in Maine.
Addressing the rising costs of energy in the short term poses a significant challenge. I remain committed to working with my Senate colleagues to advance an effective energy policy that helps America achieve energy independence for the future. At the same time, we must work to ensure stable gas and oil prices for today. Protecting the American people from excessive speculation and price manipulation is one such measure.