STATEMENT BY SEN. BERNARD SANDERS AT CFTC 

OIL SPECULATION HEARING 

Chairman Gensler, let me begin by commending you for 

holding these important hearings, and for giving me this 

opportunity to testify today. 

 As you know, when President Obama first nominated you as 

Chairman of the Commodity Futures Trading Commission, I had 

reservations about whether you were the right person at the right 

time for this job. 

 But, since you have taken over the reins of the CFTC, I have 

been impressed by some of the statements you have made and the 

initial steps you have taken to begin to tackle excessive oil 

speculation in particular and the reform of our financial markets in 

general. 

First, your legislative proposal to regulate over the counter 

derivatives would go a long way towards putting a lid on excessive 

speculation. While I believe more must be done to regulate what 

Warren Buffet correctly called “financial weapons of mass 

destruction,” clearly the plan you have presented to Congress is a 

significant move in the right direction. 

 I am also pleased that instead of waiting around for Congress 

to act, you are currently considering all of the options that the 

CFTC currently has at its disposal to ensure that the price of oil 
and other commodities are based on the fundamentals of supply 

and demand, not by those on Wall Street out to make a quick buck. 

And, I applaud your decision to make the futures market 

more transparent so that, for the very first time, the American 

people will know how much big banks and hedge funds are trading 

in oil and other commodities. 

But, I am here today to tell you that as important as these 

steps are, they will all be for naught, unless they are followed up 

by aggressive action on the part of the CFTC to prohibit excessive 

speculation in oil and gas trading. 

The bottom line is that we have got to make sure that 

Americans are no longer ripped off at the gas pump by some of the 

same Wall Street gamblers responsible for the worst economic 

crisis since the Great Depression. 

The American people are tired of excessive speculation and 

bubble economies caused by Wall Street greed. They are tired of 

record-breaking Wall Street profits and executive compensation 

packages while millions of Americans continue to lose their jobs, 

their homes, their life savings and their ability to send their kids to 

college. They are tired of hedge fund managers and firms like 

Goldman Sachs making a fortune betting that the sub-prime 

mortgage market will continue to get worse or that more 
companies will go bankrupt. The American people are tired of a 

financial system that benefits the few at the expense of the many. 

And, they are sick of a Wall Street that is allowed to make a 

fortune betting that the price of oil will go up, while millions of 

Americans pay the price at the gas pump. 

Mr. Chairman, we all learned in our economics 101 text-book 

that when supply is low and demand is high, prices are supposed to 

go up; and when supply is high and demand is low prices are 

supposed to go down. That is a concept that most Americans can 

understand. 

But, when it comes to the recent run-up in oil and gas prices 

this summer, and the astronomical prices we saw last summer, 

those economic textbooks can be thrown out the window. 

Right now, the supply of oil in the United States is at an all 

time high; and demand for oil in this country is lower today than it 

was a decade ago. 

Yet, Mr. Chairman, instead of seeing prices go down, crude 

oil prices have more than doubled since Christmas eve. 

From April to June 24th of this year, gasoline prices increased 

54 days in a row, the longest streak on record dating back to 1996. 

While gas prices have gone down some since this time, they are 

now headed back up. 
This summer’s high gas prices could not come at a more 

inopportune time, as Americans are already suffering through the 

worst economic crisis since the Great Depression. Clearly, we 

have a responsibility to do everything we can to prevent the 

manipulation of oil and gas prices so that they reflect the basic 

economic supply and demand curve, not excessive speculation. 

This would not only help Americans struggling to fill up their gas 

tanks this summer, but it would also help my constituents in 

Vermont who need to purchase heating oil to stay warm in the 

winter. 

To begin to address these problems, I introduced S.1225, the 

Energy Markets Manipulation Prevention Act to require the CFTC 

to use its emergency powers to prevent the manipulation of oil 

prices and empower the CFTC with new authority to prohibit 

excessive speculation in the oil market. 

Last July, the House of Representatives passed similar 

legislation by a vote of 402 to 19, but that legislation, 

unfortunately, did not become law. In addition, my legislation 

would also require the CFTC to do the following: 

1) Immediately classify all bank holding companies 

and hedge funds engaged in energy futures 

trading as noncommercial participants and 
subject them to strict position limits. I think the 

American people would have a hard time 

understanding why large financial firms are being 

treated by the CFTC in the same manner as truckers, 

airlines, and fuel dealers. But, that is exactly what is 

going on today. Over the past several years, the 

CFTC has granted bona-fide hedging exemptions to 

Wall Street firms like Goldman Sachs and Morgan 

Stanley allowing them to trade as much oil and gas 

as they want to in the futures market. As a result, we 

now have a situation in which the overwhelming 

majority of oil trades on the futures market are being 

conducted not by oil companies, not by airlines, not 

by truckers, not by fuel dealers who need oil, but by 

speculators. This has got to change. Classifying 

hedge funds and financial firms as speculators and 

subjecting them to strict position limits could go a 

long way towards stabilizing the price of oil and gas. 

2) Eliminate the conflicts of interest that arise when 

a large Wall Street financial institution, has 

employees under one umbrella responsible for 

predicting the future price of oil, while the same 
company owns and controls physical oil assets 

and trades in energy derivatives. Mr. Chairman, it 

seems to me that Goldman Sachs and other large 

financial institutions have a corner on virtually every 

sector of the oil and gas commodities market. When 

Goldman Sachs predicts the price of oil will go up, 

so do their profits in the oil futures market. When 

Exxon-Mobil wants to sell or buy oil in the futures 

market, they go to Goldman Sachs or other large 

financial institutions. When Sovereign Wealth 

Funds, pension funds, or smaller dealers want to 

invest in energy derivatives, Goldman Sachs and 

other investment banks facilitate those trades. When 

Morgan Stanley and other investment banks need 

insider knowledge of the heating oil market that 

benefit their traders, they physically purchase large 

quantities of heating oil for storage and delivery. 

Goldman Sachs, Morgan Stanley, BP and other 

major institutional investors even co-founded the 

InterContinental Exchange that now trades West 

Texas Intermediate crude oil to U.S. investors. We 

have got to end these conflicts of interest. 
3) And, this legislation would also immediately 

revoke all staff no-action letters for foreign 

boards of trade that have established trading 

terminals in the United States for the purpose of 

trading U.S. commodities to U.S. investors. Mr. 

Chairman, the InterContinental Exchange (ICE) 

operates a trading terminal in Atlanta, Georgia that 

allows U.S. investors to buy and sell West Texas 

Intermediate Crude Oil. But, because ICE claims 

that its headquarters are in London, England, the 

CFTC has allowed it to be regulated by the British 

Financial Services Authority. While steps have been 

taken to address this matter, in my view ICE and 

other foreign boards of trade that have set up trading 

terminals in the U.S. should fall completely within 

the jurisdiction of the CFTC. 

Mr. Chairman, I understand that there are some who still 

don’t believe that speculation is responsible for driving up oil and 

gas prices. 

But, Mr. Chairman, we know that in 2000 and 2001, energy 

traders at Enron were thrown in jail for manipulating electricity 
prices on the West Coast, causing prices to skyrocket by 300 

percent. 

In February of 2004, we know that the CFTC fined BP $303 

million for driving up the price of propane by purchasing 

“enormous quantities of propane and withholding the fuel to drive 

prices higher.” 

And, we know that in 2006, the Amaranth Hedge Fund went 

bankrupt after federal regulators found that it artificially increased 

natural gas prices by controlling 75% of all of the natural gas 

futures contracts in a single month. 

In other words, we now know that speculators artificially 

drove up electricity prices on the West Coast in 2000; propane 

prices in 2004; and natural gas prices in 2006. 

Why would anyone believe that speculators at this very 

minute are not manipulating the price of oil when supply is high 

and demand is low? 

Mr. Chairman, in conclusion, I think the American people 

were stunned that Goldman Sachs and other large financial firms 

made huge profits in the 2nd quarter of this year and will be 

rewarding their executives with huge bonuses, like the financial 

crisis never happened. 

Here are some questions that I would like answered: 
How much did Goldman Sachs and other big banks profit by 

speculating in the oil futures market last summer and this summer? 

How much was Goldman Sachs record-breaking 2nd quarter 

profit attributable to speculating in the oil futures market? 

How much will senior executives at Goldman and other 

financial firms be making in bonuses as a result of the successful 

bets they made that the price of oil would go up between 

December of last year and June of this year? 

The American people deserve answers to these questions. 

After all, Goldman and other firms on Wall Street are still indebted 

to the American taxpayer. Trillions of taxpayer dollars have been 

loaned to them with the goal of increasing lending to businesses 

and American consumers. Instead, bank lending is in free-fall, and 

Wall Street firms are busy spending their money speculating on oil 

prices and taking on other risky bets that end up hurting, not 

helping, the American people. 

We must make it crystal clear to Wall Street that the era of 

excessive speculation is over. The “heads, bankers win; tails, 

everyone else loses” system must end. 

Mr. Chairman, most importantly in my view, we need to 

create a new Wall Street that exists not to reward CEOs and 

investors for the bets they make on the price of oil or exotic 

financial instruments nobody understands. Rather, we need a Wall 
Street that provides financial services to small businesses and 

manufacturers to create decent-paying jobs and grow the economy 

by productive means.