Propane seller, lobbyist say market conditions right for runaway fuel prices
FRANK WALLIS • Bulletin Staff Writer • May 28, 2009
A propane seller and the man who represents his business interests in the U.S. Capitol told The Baxter Bulletin on Wednesday that runaway propane and motor fuels prices are likely if Congress doesn't act quickly to put an end to off-board trading in commodities.
U.S. inventories of propane and crude oil were at near-record levels and growing Wednesday, but wholesale and retail prices of crude oil, gasoline and propane prices climbed, according to signs out in front of gasoline stations and the various commodities exchange boards where motor fuels are traded.
"We have an abundance of (propane) product, but prices are going up," said Jewel Johnson, owner of Pioneer Propane Co. of Harrison. "Those two things don't match. There's something bad wrong."
Johnson said Wednesday that he has watched nervously for nearly three weeks as wholesale prices of propane edged upward about 12 cents a gallon. If that trend continues retail prices for the product will increase also. Johnson says the same market forces that were at work last year to bring consumers $4-a-gallon gasoline and $2.44-a-gallon propane are at work again now.
James Collura, vice president of governmental affairs for the New England Fuel Institute, agrees with Johnson. High fuel prices are inevitable so long as the Commodities Futures Trading Commission (CFTC) continues to turn a blind eye to off-board commodities trading.
Loopholes in federal law and CFTC regulations that once prohibited speculation in commodities markets by investors who have no real interest in actually consuming the commodity are a continuing problem, said Collura. Legislation introduced in the House and Senate, represented in House Resolution 977, would put an end to off-board trading in commodities and limit the size of futures position any investor may hold in commodities like gasoline.
"It just should not be allowed for any speculator to speculate in energy markets," said Johnson. "They're holding paper just to make money, and the commodity just happens to be what people need to survive."
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Collura says Johnson's correct.
A collapse in stock markets worldwide and an ensuing global recession leaves the futures economy (Wall Street ) without the argument that emerging economies worldwide like China and India were increasing demand and causing the price spike that escalated in August last year.
"They can't say now that global demand for oil stocks is driving the increases," Collura told The Bulletin. "That's not happening now. That's gone."
Wholesale and retail fuel prices increase during a time of unprecedented global economic slowdown, and an abundance of product supply can't be easily explained unless hidden traders are at work. Collura said rallying on Wall Street this year clearly has been enticement enough to bring speculators strongly into the oil, gasoline and propane markets.
Johnson said he has watched crude oil prices increase from about $40 a barrel to hover around $63 a barrel in the space of three weeks while gasoline increased accordingly at the retail pump.
"No one's saying there's a problem with supply," said Johnson. He said crude oil prices were bringing $63 a barrel Wednesday because investors were willing to pay that price, speculating the commodities would be worth that amount or more as the economy recovers. Johnson said some of those investors have no use or application for the product except to turn a profit.
Johnson said he believes the public has become somewhat passive on fuel prices after prices declined with the near-collapse of the global economy. Consequently, federal legislators aren't getting the feedback they need from constituents to examine closely legislation that could bring new order to commodities markets.
Johnson said he's also concerned that many people wrongly believe that the issue of transparency in commodities trading had been addressed after some public debate on the topic in 2008.
Collura said New England Fuel Institute represents the concerns of fuel merchants like Johnson, gasoline jobbers, manufacturing concerns, labor unions and an array of other entities, most of which have a hands-on stake in oil-related commodities markets.
Opponents of HR 977 are strong.
"Pretty much the entire Wall Street lobby opposes us," said Collura.
fwallis@baxterbulletin.com 
