**[The Hon. Rosa L. DeLauro]{.smallcaps}**

**[House Agriculture Committee]{.smallcaps}**

**[Hearing on Energy Market Manipulation]{.smallcaps}**

**[Wednesday July 9, 2008]{.smallcaps}**

I want to thank Chairman Peterson, Ranking Member Goodlatte and Members
of the Committee for having this important hearing and for allowing me
to submit testimony today. The issue of excessive speculation in the
energy futures markets is critical and has an impact on our entire
economy.

I also want to recognize my friend and colleague, Rep. Chris Van Hollen
and thank him for allowing me to work with him on this important issue.
Chris was one of the first to highlight the potential role of improper
speculation in our energy markets and has been a real advocate pushing
us all in the Congress to take decisive action.

Mr. Chairman, to be sure, I am not an economist; nor do I profess to
study this issue with an academic\'s eye. But care about this subject
deeply because it affects my constituents and our economy as a whole. We
know that soaring gas prices are shattering everyone's budget, killing
middle class families trying to make ends meet, farmers harvesting their
crops, truckers traveling our highways. High gas prices threaten to wipe
out the holidays that families have been looking forward to all year.
Families in Connecticut, and across the country, want to know what
government is going to do and what the oil companies are going to do.

With gas at a national average of \$4.11 a gallon -- \$1.18 more than
this time last year, and diesel hovering at \$5 dollars -- energy prices
are a suffocating tax on our entire economy.

We are in a crisis, and as such, we need to look at every aspect that
could potentially affect energy prices. Of course, we must take into
account factors such as a weak dollar, strong demand from emerging
economies, geopolitical tensions in oil-producing regions and supply
disruptions. But we must also do everything in our power to protect
consumers from unregulated market manipulation and excessive energy
speculation. Experts refer to trading energy futures off regulated
exchanges onto less transparent exchanges as a possible factor
distorting energy prices in a way that enriches speculators at the
expense of the American consumer. I have come to believe that such
activity is responsible for a big part of the commodity price increases
we are experiencing. Doing nothing in this area is not an option.

That is why we must continue to empower the Commodity Futures Trading
Commission to do its regulatory job. As its mission reveals, the CFTC's
primary function is "to protect market users and the public from fraud,
manipulation, and abusive practices related to the sale of commodity and
financial futures and options, and to foster open, competitive, and
financially sound futures and option markets." Yet, as the GAO's report
'Trends in Energy Derivatives Markets Raises Questions About CFTC'S
Oversight" \[GAO-08-25, October 19, 2007\] found last fall, \[quote\]
"trading in these markets---specifically electronic commercial markets
and over-the-counter (OTC) markets---is much less transparent than
trading on futures exchanges, and comprehensive data are not available
because these energy markets are not regulated." Clearly we need full
market transparency and we need to hold the CFTC's feet to the fire to
do its job.

With your leadership, Chairman Peterson, and a group of our colleagues,
we made progress in this area when we passed legislation directing the
CFTC to examine unregulated speculation in our Futures Markets and to
use its emergency powers to stop market manipulation. And with the Farm
bill your committee tackled the need to bring transparency to energy
trading environments by creating a new regulatory regime for certain
Over-the-Counter (OTC) energy derivatives markets, subjecting them to a
number of exchange-like regulations.

But as I understand it, we have more to do to ensure excessive
speculation is not distorting energy prices and the CFTC has access to
the over-the-counter markets and foreign boards-of-trade which still
remain obscure. I believe, we can bring further transparency to the
futures markets if we fully close the so-called "Enron-loophole" and the
"Foreign Board of Trade (FBOT) Loophole."

That is why, Congressman Van Hollen and I have introduced *The Energy
Markets Anti-Manipulation and Integrity Restoration Act --* which would
do two simple things: first, close the so-called "Enron Loophole" by
adding energy commodities and related swaps to the list of items that
cannot be traded on unregulated exempt commercial markets and second,
close the London-Dubai "Foreign Board of Trade (FBOT) Loophole" by
forbidding an exchange from being deemed an unregulated foreign entity
if its trading affiliate or trading infrastructure is in the U.S., and
it trades a U.S. contract that significantly affects price discovery.

Our legislation would go a long way toward preventing improper
speculation, ensuring real transparency, and bringing oversight and
enforcement to our energy and agricultural futures markets. It would
also restore the balance that has been missing since 2000 when The
Commodity Futures Modernization Act ("CFMA") placed large segments of
the commodities futures market outside CFTC jurisdiction and allowed for
virtually unregulated over-the-counter and electronic trading of many
commodities futures.

Mr. Chairman, the fact is some will always argue against regulating
market forces. But we have seen the consequences of that kind of
approach over the last 8 years. It is time to change the way we oversee
our futures markets and restore balance to the energy marketplace.