House appropriators followed party lines yesterday at a subcommittee hearing on a proposed 50 percent budget increase for the agency charged with overseeing oil speculation.

Commodity Futures Trading Commission Chairman Gary Gensler argued that increasing the budget from $205 million to $308 million would help meet its mandate under the 2010 financial reform law. Among CFTC responsibilities is curbing excessive speculation in the oil futures market and regulating the swaps market for the first time.

While Democrats on the House Agriculture, Rural Development, FDA and Related Agencies Appropriations Subcommittee expressed support for boosting the CFTC budget, Republicans questioned whether the agency workload has expanded enough to warrant such a large spending hike.

"How a chairman can come before us and request 50 percent more in spending, for whatever reason -- it's really, really difficult to explain," Rep. Tom Graves (R-Ga.) told Gensler.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, Gensler said, the number of trading platforms and clearinghouses that fall under the CFTC's jurisdiction will at least double and could even triple.

The agency will go from regulating the $3 trillion futures market to overseeing both that market and the $300 trillion swaps market, where transactions have historically been made outside of clearinghouses.

Last year, the CFTC requested $308 million to carry out its duties but was provided only a $3 million increase in the final fiscal 2012 appropriations package signed by President Obama in November.

Rep. Sam Farr (D-Calif.), the subcommittee's ranking member, maintained Congress should fully fund the CFTC since lawmakers gave the commission new duties.

"It's like setting a speed limit and then not having any cops," Farr said.

Within the next few days, dozens of Democratic House members are expected to write a letter to appropriators asking them to fulfill the CFTC's budget request, Rep. Ed Markey (D-Mass.) said Wednesday.

"I hope that this year the Republican majority will join us," he said. "But if they won't, we are prepared to take that battle to the House floor."

Farr, however, predicted yesterday that this year is "going to be like last year all over again."

The issue of funding the agency carries heightened urgency this year among Democrats, who argue that excessive speculation in the oil futures market has contributed to soaring gasoline prices.

About 85 percent of the oil futures market is controlled by speculators, according to weekly reports by the CFTC. It's "inarguable" that speculation is having an impact on the market, Gensler said yesterday.

The CFTC in October released a final rule that would set position limits on speculation, but that rule will likely not be implemented until the fall because of the need to gather data and finalize two other rules under Dodd-Frank. Those rules, which define which entities would be regulated in the swaps market, are being held up by the CFTC's sister agency, the Securities and Exchange Commission.

On Wednesday, Senate Democrats introduced a bill that would require the CFTC to invoke its emergency powers -- used only four times in the commission's history -- to put a halt to excessive oil speculation (E&ENews PM, March 21).