ARLINGTON, Va. – The American Trucking Associations (ATA) applauds Senate Agriculture Committee Chairwoman Blanche Lincoln (D-Ark.) for introducing what the lobbying group called “a strong derivatives market reform bill to curb excessive commodity speculation while protecting the ability of the trucking industry to hedge its exposure to increased fuel prices.”
The legislation will be marked up as soon as Wednesday and could be attached to the comprehensive Financial Reform Legislation.
“The trucking industry appreciates Sen. Lincoln’s leadership on this critical piece of legislation that will increase transparency in energy markets and reign in excessive speculation,” said ATA Vice President Rich Moskowitz. “The legislation will help ensure that fuel prices are linked to the market forces of supply and demand.”
This bill is a major step toward preventing another energy bubble like the one we witnessed during the summer of 2008, stated an ATA news release. “The lack of transparency for derivatives markets and exemptions for speculators, derivatives dealers and other financial players have made it difficult for the Commodity Futures Trading Commission (CFTC) to effectively regulate and oversee commodity markets, which determine the price for crude oil, gasoline, and home heating fuels.”
According to ATA, Lincoln’s legislation includes mandatory clearing and trading requirements and real-time reporting of derivatives trades that will close existing loopholes in the energy futures markets. The draft legislation reins in financial players, like hedge funds and insurance companies, that speculate in energy derivatives by creating centralized clearing and aggregate position limits, while leaving an exemption from clearing and exchange trading requirements for legitimate commercial hedgers like trucking companies, petroleum marketers, utilities, airlines and farmers.
“Diesel fuel is the lifeblood of the trucking industry, and sudden fluctuations in operating expenses, especially fuel, can devastate trucking companies,” said Moskowitz. “Increasing transparency and setting position limits while preserving the ability of commercial entities to hedge fuel purchases will strengthen the link between commodity prices and market fundamentals.”
A one-cent increase in the average price of diesel costs the trucking industry an additional $340 million a year in fuel expenses. Fleets spent $146 billion on fuel in 2008, a $32 billion increase from 2007 and more than double the amount spent in 2004, ATA stated.
The trucking industry relies on diesel fuel to deliver almost 100 percent of consumer products around the nation. Nearly 80 percent of U.S. communities rely solely on the trucking industry to deliver the food, clothing and medicine they need for their daily lives. High fuel prices also affect consumers. Ultimately, the consumer is forced to pay higher prices for these necessities. Access Sen. Lincoln’s draft legislation at: http://ag.senate.gov/site/legislation.html.
Dorothy Cox of The Trucker staff may be contacted to comment at email@example.com.