Discourage Speculation

Speculation in the commodities and futures markets may or may not be significantly contributing to the recent volatility and rapid rise in oil prices.  Experts generally agree that supply and demand account for at least a large part of the increase.  Still, there is undoubtedly some speculation premium built into the current price of a barrel of oil on the world market considering that total investment in oil futures contracts went from 13 billion in 2004 to over 260 billion today and that the total amount of oil represented by the contracts traded each day far exceeds the total amount that is actually produced each day.  Those would appear to be pretty strong indications that something more than just supply and demand is involved and that some action may be appropriate to limit the influence of speculation.

Our objective is to remove any speculative premium that may exist in the price of oil and the following actions will accomplish this:

Enact an American Energy Independence Plan
Adopting this or some other comprehensive plan will let the world know that new supplies are going to come on-line rapidly, relieving the upward pressure on oil prices no matter what the source.  As soon as it is apparent that a plan is going to become policy, prices will fall, perhaps dramatically.

Double the margin requirement for trading accounts
Doubling (or tripling) the margin requirement for trading accounts and putting strong pressure on our European and Asian allies to do the same should noticeably reduce any speculation there may be.  Trading accounts are defined as those who do not actually plan to take delivery of the oil or are not significant consumers of oil or petroleum products in the normal course of their business.  Doubling the margin requirement would be sufficient to force hedge funds and other large speculators to sell enough to maintain their investment ratios while also forcing speculators without sufficient cash reserves to liquidate at least some of their holdings, thereby putting downward pressure on prices.

Open the Strategic Petroleum Reserve (SPR)
We must begin to withdraw oil from the SPR in order to increase supply enough that minor disruptions in far off countries, a hurricane in the Gulf of Mexico, or the rhetoric spewed by some leader of an oil producing country can no longer cause large swings in the price of oil on a daily basis.  Not only would we be making a profit, since all of the oil in the SPR was purchased at much lower prices, but authorizing the release of up to 200 - 250 million barrels at rates beginning at 100,000 barrels per day, averaging under 250,000 barrels per day, and not to exceed 1 million barrels per day would have a huge impact on prices immediately and help to stabilize supply and demand until some new domestic production can be brought on-line to take its place.  In-kind royalties can be used to reload the SPR when withdrawals are no longer needed.  While the main purpose of this initiative is to stabilize supply, it will also have the effect of discouraging speculation.