Muckraker: Grist on Politics

On Sunday, Barack Obama promised to end unregulated oil speculation and close the “Enron loophole,” which he says are at least partly to blame for rising gasoline prices.

“For the past years, our energy policy in this country has been simply to let the special interests have their way — opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay $4.00 a gallon,” Obama said in a statement. “My plan fully closes the Enron loophole and restores common-sense regulation as part of my broader plan to ease the burden for struggling families today while investing in a better future.”

The so-called “Enron loophole” is a provision that was included in the Commodities Futures Modernization Act in 2000 that exempted energy trading on electronic platforms from regulation. Democrats say that the measure was added to the bill by former Sen. Phil Gramm (R-Texas), who now serves as a chief economic adviser to John McCain.

Gramm’s wife Wendy served on the board of directors at Enron, the company that created false electricity shortages in California in 2001 and wrung something in the neighborhood of $40 billion out of consumers. Closing the loophole would make energy markets less vulnerable to speculation.

The McCain campaign has argued back against the suggestion that the candidate is somehow implicit in perpetuating the Enron loophole, noting that many Democrats, including Bill Clinton, supported the measure. They also noted that McCain voted in 2003 to close the loophole, and said that Obama is merely “following John McCain’s lead” in opposing the Enron loophole.

In his energy speech last week, McCain also offered some criticism of oil speculation: “We all know that some people on Wall Street are not above gaming the system. When you have enough speculators betting on the rising price of oil, that itself can cause oil prices to keep on rising.”

In an interview with the Houston Chronicle, Gramm denied that he authored the loophole legislation: “The reality is that the bill was the result of hearings in the House and Senate,” Gramm told the Chronicle on Friday. “The language on energy — I had nothing to do with that provision. I did have something to do with provisions on banks.”

In his speech on Sunday, Obama also touted his plans to impose a penalty on windfall profits for oil sales above $80 a barrel. He also pushed conservation, the development of alternative fuels, and investments in new technologies that could reduce our dependence on foreign oil and overall oil consumption by 35 percent by 2030, or 10 million barrels.

The Obama campaign dispatched Jon Corzine, New Jersey governor and former CEO of Goldman Sachs, to talk up the candidate’s energy platform. You can watch Corzine talk about the plan on CNBC.