WASHINGTON – Legislation introduced by U.S. Congressman Bart Stupak (D-Mich.) aimed at closing loopholes that have allowed speculators to manipulate energy markets and artificially inflate prices has been included in the American Clean Energy and Security Act (H.R. 2454).  The bulk of Stupak’s Prevent Unfair Manipulation of Prices (PUMP) Act (H.R. 2448) was included in the chairman’s amendment to the clean energy bill.

“Tight regulation of not only the existing energy markets but also the carbon derivatives market created by the American Clean Energy and Security Act is a vital consumer protection that I am pleased the chairman and members of the committee have included in the bill,” Stupak said.  “The crises in the housing and financial sectors have shown us what happens when federal regulators are not keeping a close eye on Wall Street.”

Prior to committee consideration of the American Clean Energy and Security Act, Stupak expressed concern with the creation of a new, unregulated carbon derivates market for speculators to manipulate.  Stupak’s market regulation provisions included in the bill would give the Commodity Futures Trading Commission (CFTC) the authority to regulate carbon derivates as an energy commodity.

“The carbon derivatives market should be based on a strong regulatory framework,” Stupak said.  “The finite nature of carbon credits and absence of a physical commodity leave it particularly vulnerable to speculation.”

Stupak noted that although energy costs are down from a year ago, the American people, Congress and federal regulators should not be lulled into a false sense of complacency.  Addressing excessive energy speculation should be a key part of any new energy policy because another dramatic increase in oil prices would further devastate the already weakened economy.

“We need to look no further than today’s oil prices, which have doubled since December, to see the effect speculators have on energy prices,” Stupak said.  “We are in the middle of a recession, supply is at a 20-year high, demand is at a 10-year low, yet oil prices are up 70 percent since the beginning of the year.  This cannot be explained by simple supply and demand.  Speculators are driving these prices.

“Gas prices, home heating oil, natural gas and now carbon derivative prices should be based on supply and demand,” Stupak said.  “Not whimsical speculation by price manipulators.”

Specifically, Stupak’s carbon and energy market protections:

• Give CFTC the authority to regulate all over-the-counter (OTC) trades that are currently not regulated. 
• Regulate foreign boards of trades with energy transactions traded for delivery in the United States or on a computer terminal located in the United States.
• Close the swaps loophole, no longer allowing energy transactions to be excluded from the requirements of the Commodity Exchange Act. 
• Ban naked credit default swaps.
• Set aggregate position limits for energy speculators across all markets.
• Clear all swaps through a designated clearing organization, taking them out of the “dark” markets without oversight.
• Allow the CFTC to collect fees and create an independent funding stream for oversight and enforcement of commodity markets.
• Establish carbon as an included energy commodity subject to CFTC regulation.