The Coalition to Protect Competitive Markets
|The Coalition to Protect Competitive Markets|
The Coalition to Protect Competitive Markets is a broad-based coalition from the financial services industry formed in 2008 that has the aim of educating lawmakers and the public about what the group believes are the real reasons oil and gas prices are rising: market fundamentals and a weak dollar.
In addition to meeting with senators on the issue, the Coalition has run ads in Capitol Hill newspapers and met with officials at the White House and U.S. Treasury Department. The group has expressed concern over a provision allowing the Commodity Futures Trading Commission (CFTC) to determine how large a position can be taken in over-the-counter markets.
Members of the group are CME Group (CME), The Commodity Markets Council (CMC), The Financial Services Roundtable, The Futures Industry Association (FIA), Intercontinental Exchange (ICE), International Swaps and Derivatives Association (ISDA), Managed Funds Association (MFA) and The New York Mercantile Exchange and Securities Industry and Financial Markets Association.
On the group's Web site "WhyAreGasPricesHigh.Org," the group makes the statement that there is "no legitimate evidence available today to support the claims that investors have created a speculative oil bubble. The high prices we are being forced to shoulder are being driven by market fundamentals and a weak dollar. Global demand for oil is outstripping supplies. This problem is being compounded by the declining value of our currency. That is the reason a barrel of oil costs more than $130 and a gallon of gas costs more than $4."
Furthermore, the group says that the "solution is to adopt a sensible national energy strategy that increases domestic supplies of oil while curbing consumption through the promotion of alternative energy sources. Congress and policy makers should also examine the fiscal and monetary policies that have weakened our currency. Restricting the ability of investors to participate in futures trading won’t bring down oil and gas prices, but it will reduce liquidity in our commodity markets, undermine American competitiveness, and hinder the ability of pension funds and university endowments to diversify their investments to protect against down markets. There are solutions to high oil and gas prices. Preventing investment in our commodity markets isn’t one of them."
Coalition Statement In Response To Senate Vote
The Coalition issued the following statement on July 23, 2008 in response to a Senate vote to proceed with consideration of S. 3268, a bill introduced by Senate Majority Leader Harry Reid that the Coalition said would restrict investor participation in the commodity markets:
“The Coalition to Protect Competitive Markets is committed to working with lawmakers to address concerns asserted about the impact of speculative participation in commodity markets. We believe that additional funds should be appropriated to ensure that The Commodity Futures Trading Commission (CFTC) has the resources it needs to conduct proper oversight of the commodity markets, but we caution lawmakers against rushing forward with restrictions on investors that may harm our economy and undermine the ability of American citizens, including millions of baby boomers saving for retirement, to diversify their holdings and offset losses in equity, fixed income and real estate markets.”
“The restrictions under consideration in the Senate will simply drive commodity trading overseas, rather than providing long-term solutions to our energy needs. Reducing liquidity in the U.S. markets will make it more expensive for bona fide hedgers such as oil refiners and airlines to protect themselves from volatile prices.”
“There are solutions to high oil and gas prices. Preventing investment in the U.S. commodity markets isn’t one of them. As the Interagency Task Force on Commodity Markets determined in its Interim Report on crude oil, fundamental supply and demand factors offer the clearest explanation for the recent crude oil price increases. The Task Force also found that financial participation has not produced systematic changes in price over the past five years. Given a lack of supporting data and the consequences that limitations on free markets would have on the competitiveness of U.S. markets, we urge the Senate to focus on addressing the prevailing market dynamics driving prices higher.”
The Interagency Task Force on Commodity Markets includes the Securities and Exchange Commission (SEC), the U.S. Treasury, the Board of Governors of the Federal Reserve System, the Federal Trade Commission (FTC), the CFTC and the Departments of Agriculture and Energy. The task force is expected to release a complete study in September.
Resources On The Markets And Oil Prices
- Managed Funds Association: The Investor in a Sound Futures Market July 2008
- John Lothian July 2008 Open Letter to Congress
- Report Filed By Interagency Task Force on Commodity Markets