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Congress wary of oil-market speculation

After a failed effort to boost taxes on oil companies, lawmakers turn attention to role of speculators in driving up oil prices.

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"By consistently opposing more environmentally responsible production of American-made energy – whether it is oil exploration, oil shale, coal to liquids, nuclear, or refinery capacity – ... congressional Democrats have made clear they are just fine with higher gas prices, and they are blocking Republican efforts to lower them," said House Republican leader John Boehner in a statement on Thursday.

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But with approval ratings for Congress at near-record lows, pressure is mounting on both sides of the aisle to break partisan gridlock and produce legislation that could help. Dealmakers in the two parties are aiming to break off elements of the failed Senate bill that could muster a majority, especially moves to rein in speculation in the oil market.

"It's absolutely imperative that we demonstrate to the American people that we understand the enormous anxiety, not to mention despair, that they are experiencing given the exorbitant increases in energy prices, both on the oil front and gasoline and diesel," says Sen. Olympia Snowe (R) of Maine.

Even before the Senate bill fell to defeat, some Democratic and Republican lawmakers were lining up behind provisions to curb speculation by raising margin requirements for those investing in futures trades and banning traders from using offshore futures markets to evade regulation.

Sen. Richard Durbin, the No. 2 Democratic leader, says he will introduce a bill to strengthen oversight of energy futures trading. The Commodity Futures Trading Commission (CFTC) has announced new initiatives to increase transparency of the energy futures markets.

"The recent dramatic increases in the price of crude oil traded on futures exchanges make these efforts paramount," said the CFTC in a May 29 statement. Democrats plan hearings next week to examine whether the CFTC has the resources to carry out this oversight role.

Recent polls signal that American consumers are also beginning to focus on the role of speculators in higher gasoline prices. "The public is becoming more sophisticated in understanding the complexities of the oil market – it's not just [blame] the greedy oil companies anymore," says Frank Newport, editor in chief of the Gallup Poll in Princeton, N.J.

"Nobody mentioned speculators last year. Now, more sophisticated reasons are sinking into the public's consciousness. That's good news for oil companies, because it diverts attention from them," he adds.