WASHINGTON – Responding to news that BP has shut down the largest oilfield in America due to a pipeline leak, Congressman Bart Stupak (D-MI) wrote both President Bush and the Speaker of the U.S. House of Representatives, requesting immediate action to prevent gas prices from spiraling upwards.

In his letter to the President, Stupak asked that the Administration open the country’s Strategic Petroleum (SPR) to compensate for the loss of the BP closure.

“The Strategic Petroleum Reserve (SPR) was established for supply emergencies,” Stupak wrote.  “This shutdown, which could last several months, could cut U.S. oil production by up to 8 percent.  In order to protect American consumers and the nation’s economy, I request that you open the SPR to replace the supply disruption in Prudhoe Bay.”

In a separate letter to U.S. House of Representatives Speaker Dennis Hastert (R-IL), Stupak requested that the U.S. House of Representatives return from its August recess for an emergency session to consider legislation Stupak has authored to minimize wild oil price fluctuations by providing greater oversight and price transparency in the oil futures market. 

“Events like the closing of the Prudhoe Bay oilfield can spark speculation, fear and greed in the oil futures market,” Stupak said.  “This unchecked speculation drives oil prices higher and consumers are the ones that ultimately pay the price at the pump.  The Speaker should bring the U.S. House back now, before speculation further inflates the price of oil and consumers must contend with even higher gas prices during August and the Labor Day holiday.”

There are two types of oil futures trading.  Market trading takes place through the New York Mercantile Exchange and is overseen through the Commodity Futures Trading Commission (CFTC).  However, an increasing amount of oil futures speculation occurs “over-the-counter.”  This over-the-counter trading is conducted off market, with no regulation or oversight by the CFTC.  Stupak’s legislation, the Prevent Unfair Manipulation of Prices (PUMP) Act, would empower the CFTC to oversee over-the-counter oil futures trades, bringing needed price transparency to the multibillion-dollar oil futures market. 

“Because of the Prudhoe Bay situation, along with unrest in the Middle East, hurricane concerns, and other market fears, the potential for market manipulation is greater than it has ever been,” Stupak said in his letter to Hastert. “Without effective oversight, there is no way to know whether energy speculators are basing their trades on market realities, or are instead taking advantage of the system to make money at the expense of hard-working Americans.   To respond to this situation, I request that you call an emergency session of the U.S. House of Representatives now, rather than wait until September, to allow the PUMP Act, H.R. 5248, to come directly to the floor.”

Stupak has long been a leader in the House Democratic Caucus on energy and gas price issues.  This year, in addition to promoting the PUMP Act, Stupak led House Democrats’ efforts on legislation that would empower the Federal Trade Commission and the State Attorneys General to crack down on gas price gouging.   That legislation, the Federal Response to Energy Emergencies (FREE) Act, enjoys the support of 135 Representatives who have signed a “discharge petition,” seeking to move the bill to the U.S. House floor for consideration.
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NOTE: Below is the text of Stupak’s letter to the President and his letter to Speaker Hastert.

August 8, 2006

President George W. Bush
White House
1600 Pennsylvania Ave NW
Washington, DC  20500

Dear President Bush:

On Sunday, BP began to shut down its Prudhoe Bay oilfield after finding “unexpectedly severe corrosion” in a pipeline on the eastern side of the field and a leak spilling approximately 200 gallons.

Prudhoe Bay is the biggest oilfield in the United States.  This shutdown, which could last several months, could cut U.S. oil production by up to 8 percent.  Markets are already reflecting this reduction, as crude oil prices exceed $76 a barrel.  It will not be long before this supply disruption will drive up already high gasoline prices, which are over $3 a gallon in much of the country.

The Strategic Petroleum Reserve (SPR) was established to assist the nation during times of oil supply disruptions.  In order to protect American consumers and the nation’s economy, I request that you open the SPR to replace the supply disruption in Prudhoe Bay.  I look forward to your quick action on this request.

Sincerely,

BART STUPAK
Member of Congress

August 8, 2006

Honorable Dennis J. Hastert    
Speaker, U.S. House of Representatives   
H-232 Capitol Building     
Washington, D.C. 20515    

Dear Speaker Hastert:

On Sunday, BP began to shut down its Prudhoe Bay oilfield after finding “unexpectedly severe corrosion” in a pipeline on the eastern side of the field and a leak spilling approximately 200 gallons.

Prudhoe Bay is the biggest oilfield in the United States.  This shutdown, which could last several months, could cut U.S. oil production by up to 8 percent.  Markets are already reflecting fears of supply shortages, as crude oil prices exceed $76 a barrel.  It will not be long before this supply disruption will drive up already high gasoline prices, which are over $3 a gallon in much of the country.

Unfortunately, this situation gives speculators the opportunity to profit on the backs of the American public.  Speculators, motivated by greed, can take advantage of markets to drive up energy prices because the Commodity Futures Trading Commission (CFTC) does not provide effective oversight of off market or “over-the-counter” trades.

As Victor Shum, an energy analyst with Purvin & Gertz was quoted in an August 7, 2006 Associated Press article: “The U.S. market is actually well-supplied; crude inventories are very high.  So while this won’t have any immediate impact on U.S. supplies, the market is in very high anxiety.  So any significant disruption, traders will take that into account, even though there is no threat of a supply shortage.”

This “high anxiety” in the market, which some economists have called a “fear premium,” provides speculators with the opportunity to game the system to drive up oil prices.  Understanding the speculative nature of energy prices, I introduced the Prevent Unfair Manipulation of Prices (PUMP) Act, H.R. 5248, on April 27, 2006 to bring OTC trading under the oversight of the CFTC.  This increased oversight and price transparency will improve confidence in the market and help eliminate speculation on crude oil prices.  The legislation would also increase penalties for speculators found to be unfairly manipulating the oil futures market. 

Because of the Prudhoe Bay situation, along with unrest in the Middle East, hurricane concerns, and other market fears, the potential for market manipulation is greater than it has ever been.  Without effective oversight, there is no way to know whether energy speculators are basing their trades on market realities, or are taking advantage of the system to make money at the expense of hard-working Americans.  Our constituents are looking to Congress for relief.  It is our duty to approve legislation that would provide that relief, to protect Americans from market manipulation.

To respond to this situation, I request that you call an emergency session of the U.S. House of Representatives now, rather than wait until September, to allow the PUMP Act, H.R. 5248, to come directly to the floor. 

I look forward to working with you to address this issue of growing national importance. 

Sincerely,

BART STUPAK
Member of Congress