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Senators Want To Force CFTC To End British Control of U.S. Oil Markets

June 3, 2008 (EIRNS)—"He's gotten down on his knees to the British," was the way one Senate witness today described the chairman of the U.S. Commodity Futures Trading Commission (CFTC), which is allowing U.S. oil futures market speculation to be "regulated" by British and Dubai—instead of American— authorities. In a hearing on manipulation of the skyrocketing oil price, the expert witness, University of Maryland law professor Michael Greenberger, told seven angry members of the Senate Commerce Committee that 35% of U.S.-based trading in West Texas Intermediate Crude oil futures has shifted to "dark markets," completely unregulated, by agreement with Britain. On these markets in particular, Greenberger said, a few hedge funds and three investment houses—Goldman Sachs, Morgan Stanley, and JP Morgan Chase—are controlling 70% of the speculative buying of U.S. oil futures and driving the price of oil steadily upward, while "ironically, issuing 'predictions' that it's going to $200/barrel."

This London-Wall Street speculative manipulation of oil and energy prices, with the knowing wink of the CFTC and its chairman Walter Lukken, was also targetted by Consumer Federation of America witness Dr. Mark Cooper, and by the Senators themselves, as "the London Loophole" accounting for anywhere from 35-50% of the current price of a barrel of crude oil. Cooper told the Senators, "Roll up your sleeves, assert the national authority of the United States, and regulate these markets."

On May 25, Sen. Maria Cantwell and 22 other Senators had released a letter to the CFTC demanding that the "London Loophole" be closed. Lukken had responded on May 29 promising action "by Fall." That exchange alone was enough, said Greenberger, to brake the dizzying oil price rise at about $135-going-on-$200, and pull it back down to around $125/barrel. Senator Cantwell said after today's hearing, "Now there will be a lot more signers; and I believe CFTC will take the action required by the economy, and by the morality of the American people, now." If not, she believes the Senate will legislate to force CFTC's hand.

Greenberger and Cooper laid out in detail, how 35% of West Texas crude futures are traded on a market headquartered in Atlanta, Georgia—the Intercontinental Commodity Exchange, or ICE—which by CFTC staff actions, is juridically a London offshore market overseen only by the British Financial Services Authority! And oil futures trading on the New York Mercantile Exchange (NYMEX) is now "regulated" only by the London-controlled financial authority of Dubai, under another CFTC staff agreement. On what are effectively British offshore markets, Greenberger said, the above-cited banks and hedge funds are simply "continuing and repeating the 'subprime' crash of the securities markets, and all their derivatives, on the commodities markets."

Adding a sobering note, Gerry Ramm of the Petroleum Marketers Association of America told the Committee that gasoline/diesel/propane dealers all over the country were facing bankruptcy and would start closing their stations, because "we can't get the credit to buy our receivables," which have doubled in price.