McCain and Obama outline diverging policies

White House hopeful Barack Obama attacked energy speculators Sunday, outlining new regulatory proposals that his campaign said would slash record-high oil prices and help hard-pressed consumers.

The Democrat attacked the so-called Enron loophole, a 2000 deregulation of oversight by the Commodity Futures Trading Commission that critics say opened the way to a speculative free-for-all in the oil markets.

"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 four dollars 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 Illinois senator said.

After a week of furious controversy over Republican John McCain's call for the lifting of a federal ban on offshore oil drilling, Democrats said they would introduce new anti-speculation bills in Congress this week.

But McCain's campaign said the Republican had already backed legislative action against speculative trading, which had failed to get through the Senate, and pointed to a speech he gave in Houston last Tuesday.

McCain had said the "reckless wagering" of traders and hedge funds could "distort the market, drive prices beyond rational limits, and put the investments and pensions of millions of Americans at risk."

"Where we find such abuses, they need to be swiftly punished," the Arizona senator told oil-industry executives, calling for legal reform to make the oil futures market as "clear and effective" as other financial exchanges.

But Obama's campaign noted that the Enron measure was shepherded through Congress by former senator Phil Gramm, who is now the campaign co-chair for McCain -- proof, it said, that the Republican was out of touch with US voters.

The loophole, enacted under strong lobbying by the Enron trading company before its spectacular collapse, exempted energy traders who deal electronically from US regulation against price manipulation.

Traders were allowed to deal in oil without taking physical possession of the commodity, so US speculators have since been able to rapidly buy and sell futures contracts on electronic markets run out of London and Dubai.

According to New Jersey Governor Jon Corzine, a former boss of Wall Street titan Goldman Sachs, the real price of oil based on the laws of supply and demand should be 60-80 dollars a barrel -- rather than nearly 140 dollars.

The Enron loophole was dealt with partially in a recently passed Farm Bill, but Obama said he would go further by requiring all US oil contracts to be traded on regulated exchanges where suspected manipulation can be monitored.

The position staked out by Democrats put them in alliance with Saudi Arabia and other producers of the OPEC cartel, who argue that unregulated speculators are the driving force behind rocketing oil prices.

After announcing a Saudi output boost at an emergency energy summit in Jeddah, King Abdullah Sunday railed against speculators, but US Energy Secretary Samuel Bodman said the real problem was lack of supply.

Texas Senator Kay Bailey Hutchison, a McCain backer, said the Republican's call for offshore drilling was one way for the United States to help itself and stop speculators, along with new nuclear reactors and renewable energy.

"This is a supply-and-demand issue," she told ABC. "And yet, anything that says production is killed by the Democrats."

Obama, however, has derided the offshore drilling option as a political "gimmick" that would not yield any oil for at least a decade.

New Mexico Governor Bill Richardson, a former energy secretary, told CBS that "what we have here is Senator McCain is basically following the policies of (President) George Bush -- drill, drill, drill."

Oil companies already have "millions of acres of leases in America" that they are failing to tap, he said. One Democratic bill pending in Congress would force the companies to exploit those federal leases or lose them.