Lieberman Attributes Oil Price Rise to Influence of Big Investors
July 7, 2008 - 8:24 PM
Washington (CNSNews.com) - Sens. Joe Lieberman (I-Conn.) and Susan Collins (R-Maine) unveiled a proposal Wednesday that they say could help curb rising oil and food costs. They said the increases are largely attributable to the influence of big investors such as pension funds and other institutional entities in the financial markets.
At a news conference on Capitol Hill, the senators said they hope to use government regulations and oversight to prevent market manipulation and ease the burden of what they said are "artificially high prices."
The proposals include barring certain institutions from investing in commodity markets and closing the so-called "swaps" loophole -- which allows large investors to avoid limits on speculative activity.
If Congress adopts the proposals, Lieberman and Collins said they are hopeful consumers will benefit from lower food and oil prices in the near future.
"This is the best and quickest way to ease the pain of rising fuel costs," said Lieberman, who is chairman of the Senate Homeland Security Committee.
Speculative activity, including contracts with big commodity traders, has increased enormously in recent years. From 2003 to 2008, investment in index funds tied to commodities has grown from $13 billion to $260 billion.
Lieberman displayed a chart showing the rise of speculative activity in commodity markets and its correlation with the rise in costs of oil and food.
"Food and energy costs have increased 200 percent," he said. "There is a connection between that number and the increase in commodities speculation."
Collins, the ranking Republican on the Homeland Security Committee, agreed -- underscoring the impact of huge price increases in her home state on one commodity.
"In Maine, 80 percent use heating oil to heat their homes," Collins said. "Mainers are frantic about the cost of home heating oil."
Lieberman and Collins are hoping their proposals appeal to the majority of Americans who are feeling the crunch of high oil and food prices.
The Senate Homeland Security and Government Affairs Committee will hold hearings to discuss the role investments from large corporations, pension funds and university endowments play in the rising cost of food and oil.
The hearing is schedule for June 24.
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