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Congressional Testimony:
Oil Prices Could Be Cut in Half Within 30 Days

June 23, 2008 (EIRNS)— This was the consensus testimony of the first witness panel, consisting of financial experts, at a hearing held by the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee this morning. Four industry experts, representing energy consultants, all agreed, under questioning, that oil prices could quickly be cut in half, with no harm to producers, just by removing the speculative aspect of the market. One, Michael Masters, (who has recently testified for other Committees) even said that if the CFTC (Commodities Futures Trading Commission) would simply enforce their rules as written, a big portion of the speculative bubble could be immediately contained.

The nearly eight-hour-long hearings, which featured four panels and almost a dozen witnesses, were chaired by Rep. Bart Stupak (D-MI), who has a bill, Prevent Unfair Manipulation of Prices (HR #6330, or PUMP), which would close the now famous "London loophole," the InterContinental Exchange desk at the Atlanta trading desk. This would eliminate the traders of "video barrels," speculators who bought and sold oil with no intention (nor capability) of ever taking posession of it. Two panels of witnesses, both trader and users, insisted that Congressional action was urgent. Oppenheimer spokesman Fadel Gheit compared the situation to an overweight person having a heart attack; he might have many health problems, but this was an acute situation, requiring immediate attention.

The nature of the situation is such that even Republicans (with the exception of the two Texas oilmen on the committee) were on the defensive, careful to include in their statements references to the suffering of their constituents. Also testifying were three "consumer" representatives, from the airline, trucking and home heating oil industries. All three of them repeatedly urged Congress to act, in the words of one, "quickly, and I emphasize quickly." Also effective in his questioning was Jay Inslee (D-Wash.), who defused the Republican line that the solution was increased supply, specifically by opening up undeveloped Alaskan oil fields, by forcing witnesses to chose between that and increased government regulation. All panelists said regulation would have an immediate impact, whereas new Alaska oil would take years to affect the market.

Testifying in the fourth panel was "Sir" Robert Reid, London representative of ICE, who, through a heavy Scottish accent, defended the honor of his clients, and the allegedly thorough nature of their oversight. Reid was skewered by co-panelist Michael Greenberger, who showed that ICE was trading 30% of West Texas Intermediate Crude, on exchanges in Chicago, so to consider it a foreign company was ridiculous on the face of it. Greenberger, who, as he admitted, had the misfortune to "draw the template" for the exemption for ICE when they were a London company trading London contracts, implored Congress not to let this exemption stand. "If you [Congress] even threaten to take serious action," he said, "the price will come down."

A month ago, Lyndon LaRouche released a statement saying that "By the time of the Summer Democratic Party convention, the reality of this global financial and economic catastrophe will be clear to all and will be the dominant issue in the minds of all American citizens." It remains to be seen exactly what will come of this series of hearings, but Congress is clearly feeling the heat from hurting constituents. While a stronger regulatory environment is helpful, however, the truth is that the system is entirely bankrupt, and these hearings are not coming close to addressing that issue.