Jul 26 2013

Feinstein Amendment Requires FTC, CFTC to Improve Energy Market Oversight

Will increase data collection, investigations and oversight of unexplained California energy spikes

Washington—The Senate Appropriations Committee adopted an amendment by Senator Dianne Feinstein (D-Calif.) to strengthen government oversight of gasoline, diesel and crude oil markets. The amendment was cosponsored by Senator Tom Udall (D-N.M.), chairman of the Senate Appropriations Subcommittee on Financial Services.

“Last year California consumers faced a gasoline price spike that could not be explained by market fundamentals and forced commuters to pay hundreds of dollars to fill up their tanks,” said Feinstein, chairman of the Senate Appropriations Subcommittee on Energy and Water Development. “This is a pervasive pattern in California, the result of what may be malicious or manipulative trading activity. It is with this history in mind that I urged passage of this amendment.”

The Feinstein amendment directs the Federal Trade Commission (FTC) and the Commodity Futures Trading Commission (CFTC) to establish a joint working group that will “facilitate cooperation between the Federal Trade Commission and the Commodity Futures Trading Commission with respect to any responsibilities of those Commissions to monitor activity in, and analyze data (including data from public sources, such as the Energy Information Administration, and private sources) related to, petroleum markets.”

The goal of the working group is to “detect acts, practices, or courses of business in those markets that are manipulative, fraudulent or deceptive; and to identify potential violations of the prohibitions on petroleum market manipulation or the prohibitions on false reporting.”

The working group must submit a report of its findings within 270 days to the Senate and House Appropriations Committees that describes:

  • “The responsibilities of the FTC and the CFTC with respect to any oversight of crude oil, gasoline, and petroleum distillate wholesale markets;
  • “The number of full-time equivalent personnel at each Commission dedicated to monitoring of markets, 
  • “The types of data being collected on oil and petroleum product wholesale cash markets, and;
  • “The types of analysis being conducted with respect to that data.”

While FERC and the FTC currently have similar authority to prevent fraud and manipulation in energy markets, only FERC has used its authority in natural gas and electricity markets to pursue cases against major Wall Street banks for trading schemes that have manipulated West Coast energy markets.

The FTC (which has had authority to detect and prevent manipulation in oil and petroleum products markets since 2007) has no personnel dedicated exclusively to preventing manipulation and does not collect comprehensive data on oil and gasoline market activity.

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