Opening Statement of Commissioner Summer K. Mersinger: Meeting of the Energy and Environmental Markets Advisory Committee
September 20, 2022
(As prepared for delivery at the CFTC Energy and Environmental Markets Advisory Committee meeting in Stillwater, Oklahoma)
Thank you all for joining me, whether virtually or in person here in Stillwater, Oklahoma, and welcome to the first Energy and Environmental Markets Advisory Committee (EEMAC) meeting to be held outside of a CFTC building. Some of you may notice the slight distinction from our press release announcing this as the first EEMAC meeting outside of Washington, DC. I recently learned that the late-Commissioner Bart Chilton held an EEMAC meeting in our New York office and set up options for participation via teleconference from our DC and Chicago offices. So, Commissioner Chilton not only held the first EEMAC meeting outside of DC, I think he technically held the first hybrid meeting. In sum, what I am saying is that this advisory committee has historically taken a forward-looking approach in its meetings.
I want to thank my fellow commissioners for their interest in this committee and participation in this meeting, all of the guests in attendance and online, our panel participants, our committee chair Dena Wiggins, the committee members and associate members on EEMAC, and the CFTC staff who went all-in handling the logistics for today’s first-of-its-kind meeting, including my Chief of Staff, Chris Lucas.
A special thanks to Lauren Fulks, the Secretary for EEMAC, who has gone above-and-beyond in organizing today’s meeting. I cannot tell you how grateful I am to have Lauren as the Secretary for EEMAC. She is an amazing asset to the agency. Lauren is based out of our Kansas City office, and I believe she is the first non-DC based, CFTC staff member to serve as Secretary for the EEMAC.
I also want to recognize Emma Alexander from Congressman Frank Lucas’ office who is joining us today. Her boss, Congressman Lucas, is a former Chairman of the House Agriculture Committee and has always been a strong champion of the CFTC. Thank you, Emma, for joining us here today.
When I was considering which CFTC advisory committee to sponsor, I was particularly drawn to EEMAC because of its direct connection to the broader American economy.
When we flick on a light switch, boil water, or enter a Zoom or Teams call, we are using energy. We might not think about where that energy comes from, and that is a privilege not known to everyone across the globe. We are very fortunate because the United States boasts an energy system that is most often accessible, reliable, and affordable.
However, we should not take for granted this privilege because it takes a great deal of investment, planning, and infrastructure.
It also takes liquid and well-functioning derivatives markets. Now more than ever, as we look at global markets and face geopolitical risks around the world, it is important for us to gather facts and prepare for the future of these essential markets.
Critical energy infrastructure investments in the US contribute to the strength and vibrancy of the energy futures markets regulated by the CFTC. But we cannot forget that physical infrastructure requires repairs, updates and upgrades to remain efficient. Ignoring existing infrastructure and failing to invest in updates and upgrades to traditional energy infrastructure will not only make the transition to renewable sources of energy costlier and more difficult, it could prevent us from ever achieving our well-intended clean energy goals.
In that context, as we look broadly at energy and environmental derivatives markets, I see two areas where the EEMAC can offer invaluable insight and expertise.
First, is evaluating what is required to ensure the energy markets in the US remain resilient despite the numerous strains on the system globally. Predictable supply and reliable distribution of physical energy is critical to ensuring the derivatives markets we regulate at the CFTC continue to serve as effective price discovery tools, helping end users and other market participants hedge and manage risk.
Second, is evaluating what emerging threats could potentially impact our CFTC-regulated futures markets as we focus on energy transition in the face of ever-changing geopolitical factors. Does that transition risk pose a threat to our overall financial stability given the importance of an affordable and reliable energy supply to our entire economy?
Today, we take a look at two areas related to those questions:
- Investment in physical energy infrastructure and the effects on the broader economy, including commodity derivatives markets; and
- The role of critical metals as components in transitional energy sources, and the potential impact and opportunities for CFTC-regulated metals markets.
The utility of energy commodity futures markets is closely tied to the underlying commodity’s creation, transmission and eventual use. Distortions in any of those three phases can have a significant impact on CFTC-regulated markets. These markets tend to function as the economic shock-absorbers in times of market volatility, something we have seen first-hand over the last few years. Without properly functioning energy futures markets, the financial risks from current global energy-related supply disruptions, as well as the cost of transitioning from traditional energy sources to more renewable forms of energy, have the potential to become systemic risks to our entire economy.
So as not to sound too apocalyptic, I recognize that very smart and dedicated individuals are working to really understand these risks and identify policies and actions to avoid these dangers. We are so fortunate to have a few of those individuals with us today.
On our first panel, Cortney Cowley, Senior Economist in the Regional Affairs Department of the Federal Reserve Bank of Kansas City, and Paul Wight, Senior Legal Advisor to Commissioner James Danly of the Federal Energy Regulatory Commission, will discuss the generation and transmission of traditional energy. Cortney joins us from here in Oklahoma, and Paul made the trip from DC to Oklahoma to present to us today. Thank you both for all of the time and effort you have put into your presentations. I know your time is valuable and limited, so we are very honored to have this opportunity to hear from both of you.
On our second panel, Derek Sammann, Senior Managing Director, Commodity and Options Products for the CME, will discuss the current state of metals markets and provide thoughts on where he thinks metals markets are heading. Derek is an esteemed member of the EEMAC, and I am extremely grateful that he is sharing with us what I am learning is just a sliver of his vast knowledge.
Derek’s presentation is the start of what I believe is a novel discussion about what is needed to achieve stated policy goals around transitioning away from fossil fuel-based energy. Copper, aluminum, steel, and lithium are just a few examples of the metal inputs necessary for environmentally-generated energy production and end use. Any discussion around energy transition is not complete without discussing these commodities and associated markets.
Again, thank you to my fellow commissioners, committee members and associate members, and guests for taking time out of their busy schedules to explore these important topics. I also want to thank Oklahoma State University for allowing us to hold today’s meeting on their campus. It is an honor to be here. Yesterday, I had the privilege of speaking to Dr. Riley’s Commodity Futures Markets class and share some insight into our role as a regulator at the CFTC. I think I met a few future CFTC commissioners.
With that, I will turn it over to my fellow commissioners who are joining us virtually today for their remarks. I look forward to a robust and informative discussion.