Bill to curb speculation moves forward

Senate Majority Leader Harry Reid of Nevada says curbing speculation is "not a panacea," but "there's no doubt it's a major part of the problem." (David S. Holloway/ Getty Images)

WASHINGTON - Senate Democrats cleared the first hurdle yesterday for legislation that aims to curb speculation in energy markets in response to record prices.

The motion to go ahead with debate was approved 94 to 0, and the legislation requires another vote before it clears the Senate. Democrats said the measure could reduce oil prices as much as 50 percent. Oil hit a record $147.27 a barrel on July 11.

The legislation "should immediately and sustainably lower prices," said Senate Majority Leader Harry Reid of Nevada, the main sponsor. While curbing speculation is "not a panacea," Reid said, "there's no doubt it's a major part of the problem."

Reid's legislation requires the Commodity Futures Trading Commission to impose limits on speculative trading in oil and natural gas futures markets. It also requires more reporting in energy markets to prevent market manipulation.

Senate Republicans contend the measure should do more to tackle high energy prices, including expanding offshore drilling, as called for by President Bush.

"The American people will not accept a timid approach to such a major problem," said Senator Mitch McConnell of Kentucky, the highest-ranking Republican in the Senate. "This is the biggest issue in the country right now, by far."

White House spokeswoman Dana Perino said the administration wants Democrats to allow amendments to the measure that would expand oil supplies.

"Speculation does cause some volatility in day-to-day market fluctuations of oil prices," Perino told reporters. "We believe that the root cause of high energy prices is supply and demand."

The unanimity of the vote was "surprising," given opposition from major banks to the proposal, said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Mass.

"It will make the market more transparent, which is a good first step," Emerson said. "There doesn't appear to be anything in the legislation that is so onerous that it would hurt the futures market."