Statement of Commissioner Dawn D. Stump before the CFTC Energy and Environmental Markets Advisory Committee
March 24, 2020
The mission of the Commodity Futures Trading Commission (CFTC) is to promote the integrity, RESILIENCE, and vibrancy of the U.S. derivatives markets through sound regulation. Today, I want to focus on resilience – not just as it relates to regulating the derivatives markets but, more generally, how it was demonstrated and revered during my upbringing in Texas and how those lessons resonate today. I grew up in an area almost exclusively dependent upon production agriculture and 175 miles (a short distance by Texas standards) from the Permian Basin, the state’s oil producing region. Both industries are critical to the economy of Texas and the nation, but during my childhood in the 1980s the agriculture and energy sectors were in a state of turmoil due to depressed market conditions and credit constraints. While these were extremely difficult times, I can attest that the dedication to produce energy and food was never lost, nor was the respect for innovation and markets. In fact, the resilience of these industries is rooted in a trust that if they do their part to feed, clothe, and power the nation, innovators will develop technologies to improve their efficiencies and markets will operate transparently to help them better manage their risks.
My somewhat distanced childhood memories now serve as vivid reminders that our resilience is dependent upon a shared commitment to do our part. In today’s environment, public health is everyone’s priority. As such, food deliveries, expedited grocery restocking, virtual classrooms, school meal distribution, and expanded hotspot locations in areas without internet services all promote stability and social distancing – none of which would be possible without reliable sources of energy.
As for the CFTC’s part in all of this, we have an obligation to preserve the integrity of the market tools for those who produce, distribute, and consume energy during these volatile times. They need all available tools to manage their risks and reliably discover prices on transparent market venues. I am grateful for all of those here at the CFTC who have been carrying out the agency’s responsibilities during these difficult times, especially the team that will present today’s discussion. This group has worked day and night over the past few weeks.
Price discovery is sometimes a grim job but it is nonetheless our task to fulfill. In July of 2008, I distinctly recall West Texas Intermediate crude prices soaring to $147 per barrel. Last week, the same market touched $20 per barrel. In each of these circumstances, we acknowledge that there are real-world implications for consumers and producers and we must ensure that the price is transparent regardless of its favorability. Only then are these markets able to serve their risk management function. We also take seriously our obligation to ensure that those who may attempt to manipulate the markets are held accountable.
Over the past few weeks I have been in touch with folks in various commodity businesses. Like the entire nation, they are worried about the public health situation. Like many others, they are concerned about the sustainability of their livelihood. The commodity production and distribution business is inherently risky, and we as a nation are grateful to those who are willing to take on such endeavors in order that we might eat and power our modern lives. Today we are reminded that resilience is everyone’s shared responsibility, and at the CFTC it is a part of our mission.