Obama proposes steps to curb oil market manipulation
WASHINGTON — Facing heat for high gasoline prices, President Obama tried to shift the focus to Congress, Republicans and energy traders, calling for legislation that he said would “put more cops on the beat” to crack down on potential manipulation of the oil market.
Obama called on Congress to provide more money for regulators and increase penalties for market manipulators. The president, flanked by Treasury SecretaryTimothy F. Geithnerand Atty. Gen. Eric H. Holder Jr., suggested that traders and speculators are affecting the price of oil and digging into Americans’ pocketbooks.
“We can’t afford a situation where some speculators can reap millions while millions of American families get the short end of the stick,” Obama said in brief remarks in the Rose Garden on Tuesday. “That’s not the way the market should work.”
Obama’s proposal would add $52 million to the budget for the Commodity Futures Trading Commission, which oversees oil futures markets, to pay for improved technology and additional employees. The president also proposed increasing the maximum civil and criminal penalties for manipulative activity in oil futures markets and beefing up data collection.
Republicans have pushed to trim the CFTC as part of their budget-cutting push.
Independent analysts and Republicans quickly questioned whether Obama was exaggerating the effect of speculation on the market. The White House did not point to any evidence that illegal conduct was on the rise.
Independent analysts have said speculators are a factor in the recent surge in oil prices but are not the main reason. A study last month by the Federal Reserve Bank of St. Louis said global demand has been the main driver of higher oil prices over the last decade. Speculation was the second-largest factor, accounting for about 15% of the rise, the study said.
Republicans on Capitol Hill labeled the proposed legislation a political ploy.
But the president argued that the measures were necessary to prevent illegal trading as the volume of trading increases.
“Imagine if the NFL quadrupled the number of teams, but didn’t increase the number of refs,” Obama said. “You’d end up having havoc on the field, and it would diminish the game. It wouldn’t be fair. That’s part of what’s going on in a lot of these markets.”
Obama’s expected Republican opponent, Mitt Romney, accused the president of over-regulating industries and slowing production.
“He’s made it harder through trying to push the [Environmental Protection Agency] into regulating fracking for natural gas and oil, made it harder to get a reliable supply of gas, made it harder for those that mine coal and for those that use coal, made it harder to drill for oil,” Romney said as he campaigned near western Pennsylvania’s coal country.
Domestic oil and gas production actually has increased, and fracking — a technique primarily for producing natural gas — is not a direct factor in the price of gasoline. Still, the issues of energy and regulation are likely to resonate further as long as commuters are paying more at the pump.
It’s possible that gasoline prices already have peaked. Prices have fallen nationally for the last two weeks after reaching a high of $3.941 on April 2. Crude oil futures prices, which have risen steadily since October, also have gradually been edging lower, according to Energy Department data.
But prices remain markedly higher than they were a few months ago, which has helped make energy a weak spot for Obama. A Pew Research Center survey released Tuesday found that two-thirds of voters called energy a very important issue in the election. Romney had a slight edge with voters who saw energy as a top priority.
The White House’s strategy for changing that dynamic looks much like its strategy on other pressing issues — use the unpopular and deadlocked Congress as a political foil, putting the onus on lawmakers to act and chiding them for disagreeing with the president.
“Congress should do all of this right away,” Obama said. He also blasted congressional Republicans for blocking legislation that would have eliminated subsidies for oil companies.
“Here’s a chance to make amends, a chance to actually do something that will protect consumers by increasing oversight of energy markets,” he said.
Some analysts said Obama’s proposal would at least make oil prices less volatile.
“It’s gotten way too out of control,” said Ben Brockwell, director of data pricing for the Oil Price Information Service, an energy information company. “The speculators are a prime mover in this market.”
But Senate Minority Leader Mitch McConnell (R-Ky.) dismissed Obama’s proposal as an election-year gimmick.
“If I were to guess, I’d say today’s proposal by the president probably polls pretty well. But I guarantee you it won’t do a thing to lower the price of gas at the pump,” McConnell said.
Times staff writers Maeve Reston in Bethel Park, Pa., and Jim Puzzanghera in Washington contributed to this report.
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