February 20, 2008

Finish Tying the Knot in the “Enron Loophole”

By Katherine Wollny [POL 301D-Spring 2008]

My father’s past mumbling echoes in my mind as I think back to all the times I’ve asked him for a few bucks to grab a cup of coffee before school or work. As he’d fork over the cash, I would always hear the same story—how a cup of coffee used to be ten cents and it is outrageous that my extra large regular from Dunkin Donuts cost almost $2.25 (I wonder if the story would have been more exaggerated if I was a Starbucks latte lover instead). It was a ritual that came standard when asking to borrow money for almost anything. In recent years, the latest and greatest version has been about the price of gasoline and the cringing thought of giving me two twenty dollar bills and hoping that it would be enough to fill my itty-bitty thirteen gallon tank. I never thought the day would come so soon when I would share the same sick feeling with my father every time I pull up to the pump.

In 2001, being among the sixteen year olds who experienced a bad license picture for the first time, I clearly remember the gas price posted when pulling in the station after the landmark event: $1.26 per gallon. Luckily, the Gulf station down the road from my apartment, now seven years later, is one of the cheapest places to gas up in the county at $3.17. Twenty minutes south to the next town where my parents live, it’s a whopping $3.39. Just the fact the price is over three dollars amazes me—over two dollars for that matter. How did this happen?

It all started with one name we all know: Enron! In 2000, the Enron Loophole Act was passed with the original intent of deregulating energy futures trading facilitated by the now defunct “Enron Online.” This loophole has been taken advantage of, causing the energy commodity markets to be dubbed “dark” by the lack of oversight, and creating excessive speculation and energy price manipulation. The price for crude and heating oil, gasoline, natural gas, and propane effects every American in their day to day lives.

My parents are a perfect example. Both are retired and living on fixed income, which is significantly smaller now compared to when they first entered retirement five years ago. Now with the surge in heating oil prices, they have become considerably more conservative: so layer up because your hand will be cut off if you dare touch the thermostat. But seriously, the oil bill took up a large chunk of their monthly budget this winter and it shows by their new pattern of spending autonomously. I cant grocery shop in my mother’s pantry anymore because it is starting to look as pathetically bare as mine, filled with minimal generic brand necessities. It should never have come to this!

Why hasn’t anything been done to correct this major problem that has been an infection in our economy for so long? There are a handful of reasons, but here is what I think is the big answer: the Commodity Futures Trading Commission (CFTC), who would be responsible for regulating actions in the energy commodity markets has been severely crippled by a significant decrease in funding, resulting in insufficient resources necessary to do its job effectively. Even worse, the advisory committees assigned to the CFTC commissioners are conquered by financial players, who depend on the little oversight, and do not include the vital input of the majority—consumers and small businesses.

At least Congress has taken notice of these shenanigans in recent months. Last June, a bipartisan report came out of the Senate Permanent Subcommittee on Investigations acknowledging price distortions in the energy futures market, being supported by “a broken regulatory system that has left our energy markets vulnerable to any trader with sufficient resources to alter energy prices for all market participants.”

Thank you, Senator Carl Levin, for bringing this to the Senate floor and introducing the Close the Enron Loophole Act in September. You started the ball rolling, so please continue it down the right path to quickly cover the entire hole. By next winter, I expect to be able to visit my parents in a toasty warm house.

1 comment:

Demos said...

There has been a significant reduction in funding for regulatory agencies who are to keep the private companies honest and to protect the consumer.

The same goes with the lack of oversight when billions of dollars in government contracts are awarded to companies, often with no bidding.


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