Obama orders oil-speculation task force back into action - but it says it never stopped

McClatchy NewspapersMarch 8, 2012 

WASHINGTON — President Barack Obama this week ordered his much-publicized Oil and Gas Price Fraud Working Group back to work. He created it last April to get to the bottom of soaring gasoline and oil prices.

His own administration claims, however, that the panel never stopped working, which makes the White House announcement that he's ordering it back into action somewhat curious. It comes at a time of growing political pressure on Obama to curb financial speculation in energy markets, which many analysts blame for accelerating the recent oil and gasoline price spike.

During his first press conference of 2012, Obama on Tuesday fended off questions about whether he shared blame in the steep and worrisome climb in gasoline prices. He rattled off a number of accomplishments in domestic production, blamed much of the price rise on mounting tensions with Iran, then added that he was making sure Attorney General Eric Holder was "paying attention" to speculation in the oil markets.

"I've asked him to reconstitute a task force that's examining that," Obama said.

Obama's press secretary, Jay Carney, repeated the assertion during his daily press briefing on Thursday, noting that the president "has asked the attorney general to reconstitute that working group for the same reason, which is, he wants the Justice Department to make sure that there are no cases of fraud taking place when it comes to the rising price of gasoline."

A growing number of former regulators, lawmakers and financial analysts blame excessive speculation for driving up energy prices. They aren't alleging fraud, however. What the speculators are doing is perfectly legal.

The problem is that financial speculators now make up 65 percent or more of the purchasers of contracts for the future delivery of oil. Historically speculators controlled only about 30 percent of such contracts. They're making big profits and driving up oil prices by bidding up contract prices, riding the market's "fear premium" about possible Persian Gulf violence over Iran and inflating it.

Analysts from Wall Street, Washington lawmakers and consumer groups are calling for the Commodity Futures Trading Commission to impose limits on how many such contracts any purchaser can buy in order to curb speculation, but financial lobbies have tied up the CFTC's effort in federal court. Obama has never mentioned any need for the CFTC to act, to the growing frustration of many Democrats in Congress.

Pressed by McClatchy for details on how an active working group would be reconstituted, Carney said simply that rising prices are a worry now.

"What we are seeing now in the last several weeks and months is a new surge in the price of oil for a variety of reasons that have to do with the global oil market," he said. "We are seeing then the concurrent spike in the price of gasoline that Americans pay at the pump, and the president believes that it's important to be sure that there's no fraudulent speculation involved in that — in those spikes in the price."

As to why restart a working group if it didn't find anything last year and went dormant, Carney offered that, "you don't know until you investigate what you might find. And whatever they found or didn't find a year ago is not dispositive towards what they might find or might not find as they investigate going forward."

Just days earlier, McClatchy asked in a March 1 report what the task force had done over the past 10 months; the answer was, very little. Administration sources who spoke on condition of anonymity because they weren't authorized to say such embarrasing truths acknowledged that the working group had met only five times last year, three of those soon after the April 21 formation of the inter-agency task force. The working group now has met seven times in all, the Justice Department said Thursday.

Last week, the Justice Department insisted to McClatchy that the task force had remained active despite a lack of full meetings, and said the working group had created important communication between agencies with overlapping responsibilities for policing oil and gasoline price gouging and uncompetitive behavior.

An official at another federal agency cooperating on the working group confirmed to McClatchy on Thursday that the working group had not been shut down, though it had not met in quite a while.

"At the president's direction, the attorney general_ through the Oil and Gas Price Fraud Working Group_ is aggressively focused on identifying civil or criminal violations in the oil and gasoline markets, and ensuring that American consumers are not harmed by unlawful conduct, which remains an important priority," Adora Andy, a Justice spokeswoman, said Thursday in a statement. "With the recent increase of gasoline prices, the working group is monitoring the situation, and if we find any evidence of criminal behavior or other misconduct, we will respond immediately."

A Justice Department official, demanding anonymity in order to speak freely, said Thursday that Attorney General Holder has directed the full Oil and Gas Price Fraud Working Group to meet Friday.


Whatever happened to task force on oil speculation?


To ask a question about this story or any economic question, go to McClatchy's economy Q&A

Once again, speculators behind sharply rising oil and gasoline prices

Study: older workers are exiting fast, shrinking the labor force

Two survivors provide intimate look inside Lord's Resistance Army

McClatchy Newspapers 2012

McClatchy Washington Bureau is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service