Obama Seeks to Confront Oil Market Manipulation

Barack Obama gas pricesWASHINGTON (AP) - Under pressure to take action on rising gasoline prices, President Barack Obama wants Congress to strengthen federal supervision of oil markets, increase penalties for market manipulation and empower regulators to increase the amount of money energy traders are required to put behind their transactions.

The White House plan, which Obama was to unveil Tuesday, is more likely to draw sharp election-year distinctions with Republicans than have an immediate effect on prices at the pump. The measures seek to boost spending for Wall Street enforcement at a time when congressional Republicans are seeking to limit the reach of federal financial regulations.

Obama plans to spell out his $52 million proposal Tuesday at the White House, where he will be joined by Attorney General Eric Holder.

Republicans have been hammering Obama on his energy policies, recognizing the political cost of high gas prices on the president. Obama's plan would turn the tables on Republicans by taking aim at Wall Street's role in the oil price chain.

Senior administration officials who put together the proposal said it aims to detect and deter illegal manipulation by energy speculators, the type of practices that many Democrats blame for the high cost of gasoline. The officials spoke on the condition of anonymity to discuss the plan ahead of Obama's announcement.

They would not go as far as to say that market manipulation is responsible for rising gas prices, but the officials said they wanted to curtail the ability of speculators to take unlawful advantage of oil price volatility.

At issue is the increasing role of investment in oil futures contracts by pension funds, mutual funds, hedge funds, exchange traded funds and other investors. Much of that money is betting that oil prices will rise. Analysts say it is possible that such speculation has somewhat inflated the price of oil.

At the same time, investors can also bet that prices will go down - indeed, speculators have been credited for low natural gas prices. Studies of the effects of speculation on oil markets indicate that it probably increases volatility, but doesn't have a major effect on average prices.

Still, seeing a potential problem with speculators is not limited to Obama or Democrats or this election season. When gasoline hit $3 a gallon in 2006, George W. Bush launched an investigation, declaring Americans "don't want and will not accept ... manipulation of the market. And neither will I." Last year, as prices rose, Obama and Holder announced the creation of a task force to look into fraud in the energy markets.

Obama's plan this time calls on Congress to:

- Increase six-fold the surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation.

- Increase spending on technology to provide better oversight and surveillance of energy markets.

- Increase civil and criminal penalties against firms that engage in market manipulation from $1 million to $10 million.

- Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.

In addition, the Obama administration, on its own, will increase access to the commission's data so the White House Council of Economic Advisers can examine and analyze trading information.

The White House effort comes at the same time that Republicans have been pushing Obama with their own energy proposals. House Speaker John Boehner, R-Ohio, wants to seek votes on more domestic oil and natural gas exploration, a freeze on regulations on refineries and approval of construction of the Keystone XL pipeline from Canada to Texas, a project Obama has blocked.

Republicans are also trying to place limits on the financial regulation legislation Congress passed in 2010 over Republican objections. Though the House Republican budget, which calls for sharp reductions in government programs, does not specify reduction in spending by the trading commission, the administration officials said that if the cuts were applied the commission would lose more than five times what it spends on regulating energy markets.

The debate will pit Republicans who blame Obama for high gasoline prices against a White House that blames Republicans for coddling Wall Street.

Increase your money and finance knowledge from home

Intro to Retirement

Get started early planning for your long term future.

View Course »

Building Credit from Scratch

Start building credit...now.

View Course »

Add a Comment

*0 / 3000 Character Maximum

28 Comments

Filter by:
ldaily

All well and good, but let's not forget that oil prices are basically about supply and demand--mostly about demand coming from the U.S., China, and India. Put up more windmills!

July 09 2012 at 1:55 PM Report abuse rate up rate down Reply
sonny

It would be interesting to see a chart of gas prices versus crude during Bush and Obama presidencies. Whoever makes up the reasons foe price variations has a spectacular imagination. That goes for the stock market as well.

April 25 2012 at 5:04 PM Report abuse rate up rate down Reply
jdrabe

the real reason they want a 9 billion dollar pipeline is so they can export the dakota oil through the Galveston terminals. otherwise, they would just build a refinery in North Dakota. They are already exporting 500,000 gallons of refined product a day

April 25 2012 at 8:33 AM Report abuse rate up rate down Reply
jmarsinisr

Finally! Comments are indicating that people are getting informed about the prez.

April 18 2012 at 2:15 PM Report abuse +2 rate up rate down Reply
democracks0

Obamas not worried about gas prices being high. He's busy scouting out vacation spots in Columbia for Michelle and himself on the tax payers dime!

April 18 2012 at 1:18 PM Report abuse +3 rate up rate down Reply
AOL

Obama is always looking for someone to blame to avoid the reality that his failed or do-nothing policies could be seen as what they are...Nothing. No new refineries, block the Keystone pipeline, issue no new drilling permits for offshore, and now he has the gall to blame some futures trader! As always, it must be Bush's fault. Barrt needs a reality check and we need a new POTUS.

April 18 2012 at 11:58 AM Report abuse +5 rate up rate down Reply
Somey

So long as the well funded GOP keep promoting their Kochsian economics the middle class will continue to be gouged at the pump.

April 18 2012 at 10:30 AM Report abuse -6 rate up rate down Reply
2 replies to Somey's comment
democracks0

Sometroll continues to obsess with Koch brothers. Maybe it's something in the name that get's that tingling feeling running up his leg.

April 18 2012 at 1:16 PM Report abuse +4 rate up rate down Reply
democracks0

SIMP!

April 18 2012 at 1:19 PM Report abuse +3 rate up rate down Reply
yigal

We the consumers can control the price of oil. Ask me and I'll show you a way to do it. I need a large number of followers. We did the same thing when sugar sky rocketted, we can do it with gasoline prices.

April 17 2012 at 10:44 PM Report abuse -1 rate up rate down Reply
Craig and Valisha

He could cut spending by not taking anymore vacations.

April 17 2012 at 10:16 PM Report abuse +1 rate up rate down Reply
jdykbpl45

Obama went to Boston,
To buy himself a new Austin,
There was room for his ass,
He could not afford any gas!
And his junk hung out so he lost them,

April 17 2012 at 8:05 PM Report abuse +1 rate up rate down Reply
1 reply to jdykbpl45's comment
Somey

Where did you get this poem; Mother Goose?

April 18 2012 at 10:23 AM Report abuse -3 rate up rate down Reply
1 reply to Somey's comment
democracks0

Brilliant response there Somehole

Simp!

April 18 2012 at 1:20 PM Report abuse +3 rate up rate down