Under fire over high gas prices, Obama calls for tighter curbs on oil market manipulation

Olivier Knox
The Ticket

Fighting to contain voter anger over sky-high gas prices, President Barack Obama urged Congress to toughen penalties for improper manipulation of oil markets and called for stricter government oversight of energy markets.

"None of these steps by themselves will bring gas prices down overnight," the president said in the White House Rose Garden. "But it will prevent market manipulation and make sure we're looking out for American consumers."

The American Automobile Association puts the national average price for a gallon of regular at $3.904.

On a White House-organized conference call to preview the announcement, senior administration officials refused to say how much improper or illegal manipulation added to the per-gallon price at the pump or when, if at all, Americans could start seeing the policy reduce the cost of filling up.

"You won't find the administration making projections about the particular impact, or the particular price impact, of any particular policy," one official told reporters on condition of anonymity. "We would leave that to outside analysts to disentangle."

And Republicans scoffed and pointed to the Obama administration's Oil and Gas Price Fraud Working Group, which was announced with great fanfare in April 2011. The task force "has met only four or five times since its creation" and "has never reported to the public," according to one published news account.

"Listen, the president has all the tools available to him if he believes that the oil market is being manipulated," Republican House Speaker John Boehner told reporters. "Where's his Federal Trade Commission? Where's the SEC? He's got agencies there," said Boehner, Obama's chief critic on energy issues. "So, instead of just another political gimmick, why doesn't he put his administration to work to get to the bottom of it?"

Independent analysts blame high gas prices on soaring demand in growing economies like China and India coupled with unrest in the Middle East—in particular, the tensions over Iran's suspect nuclear program—that fuel fears of potential future supply disruptions. They also say that there is virtually nothing a president can do in the short term to affect the price at the pump.

Obama noted those factors and warned "there are no quick fixes to this problem" but said government must "work extra hard to protect consumers from factors that should not affect the price of a barrel of oil. That includes doing everything we can to ensure that an irresponsible few aren't able to hurt consumers by illegally manipulating or rigging energy markets for their own gain."

He called on lawmakers to boost the surveillance and enforcement staffing budgets for the Commodity Futures Trading Commission (CFTC) by at least six times the current levels and to give the agency a technology upgrade. The two steps would have a combined price tag of about $52 million, according to a White House estimate.

"These markets have expanded significantly," said Obama. "Imagine if the NFL quadrupled the number of teams, but didn't increase the number of refs. You'd end up having havoc on the field. And it would diminish the game. It wouldn't be fair."

The president also pushed to ramp up penalties for illegal energy-market manipulation, raising the ceiling on civil and criminal fines from $1 million to $10 million and assessing them on a per-day rather than per-violation basis.

And he called for enabling the CFTC to raise the so-called margin requirements on oil markets—the amount of money a trader must have on hand to back up a trade position—which could discourage some speculation.

The impact on gas prices of improper market manipulation, which occurs when a trader or group of traders improperly attempts to affect the price of a given commodity, is unclear.

And some consumer advocates worried that the White House focused too much on market manipulation and not enough on speculation, which has been putting upward pressure on prices.

"You want the CFTC to have more cops on the beat, but there's a confusion here. They really have to focus on speculation," said Dennis Kelleher, president and CEO of Better Markets, a nonprofit organization that promotes the public interest in capital and commodity markets.

"It's like a town that's suffering from a string of bank robberies and you send all of the cops to the penny-candy store to see whether anything's been stolen," Kelleher told Yahoo News by telephone ahead of Obama's announcement.

Kelleher estimated that "somewhere between 10 percent and 25 percent of the price at the pump is likely due to excess speculation—not manipulation."

Obama's proposal fit into his broader election-campaign narrative that he is fighting for ordinary Americans while Republicans fit in the pocket of big business. It also seemed sure to fuel Republican charges of government overreach into the free market.

The announcement came with Republicans using high gas prices to pummel the president, whose re-election hopes turn largely on a fragile recovery that could stall if energy costs rise.

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