Apr 26, 2010 12:03 PM

The American Trucking Associations (ATA) applauds US Senate Agriculture Committee Chairwoman Blanche Lincoln (D-AR) for introducing 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 could be attached to the Financial Reform Legislation.

This bill is a major step toward preventing another energy bubble like the one witnessed during summer 2008. 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.

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.

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.