Obama pushes oil market manipulation proposal to counter high gas prices

President Obama, in his latest effort to limit the political fallout
from high gasoline prices, on Tuesday challenged Congress to pass
legislation to ensure speculators aren’t manipulating energy markets.

“We
can’t afford a situation where speculators artificially manipulate
markets by buying up oil, creating the perception of a shortage and
driving prices higher, only to flip the oil for a quick profit,” Obama
said during a Rose Garden speech Tuesday.

“We can’t
afford a situation where some speculators can reap millions, while
millions of American families get the short end of the stick.”
Republicans,
who have battered the president over high gas price for months, quickly
dismissed the plan as a political gimmick, arguing that the federal
agencies already have the ability to prevent manipulation.

“President
Obama’s government-by-gimmick is reaching another new low today,” GOP
presidential hopeful Mitt Romney said in a statement. “While American
families struggle to pay gas prices that have doubled on his watch, the
president’s only solutions are to target oil and gas producers for
higher taxes and now to dramatically increase federal regulation.”

Obama’s
proposal is unlikely to pass the House and faces major hurdles in the
Senate, amid major opposition from Republicans. But Senate Majority
Leader Harry Reid (D-Nev.) said Tuesday he is working with the White
House on legislation based on the five-point plan, which would boost
funding and resources at the Commodity Futures Trading Commission
(CFTC), the federal agency responsible for monitoring energy futures
markets.

The plan marks the latest push by the White House
to convince the public that Obama is doing everything he can to rein in
high gasoline prices, amid recent polls that indicate the issue could
hurt the president going into the election.

Gasoline prices
have risen sharply this year, but dropped slightly in recent days to a
national average of $3.90, according to AAA.

The president,
earlier this year, said he was tasking Attorney General Eric Holder
with “reconstituting” a Justice Department-led panel formed in 2011 to
explore potential manipulation that might affect gasoline prices.

But it is unclear how much market manipulation is to blame for high gas prices.

An
investigation by a CFTC task force, conducted in 2008 when gasoline
prices reached an all-time high, found little evidence to “support the
proposition that speculative activity has systematically driven changes
in oil prices.”

Still, the plan won the backing of CFTC Chairman Gary Gensler, a Democrat appointed by Obama.

Brian
Deese, deputy director of the National Economic Council, told reporters
at the White House Tuesday that the administration is working
aggressively to identify cases of market manipulation.

“I
would say that if you look over the past year, the CFTC has opened
cases against … energy firms for potential manipulation,” Deese said.
“The [Federal Trade Commission] has an open investigation into
potential anticompetitive behavior by oil refiners. And so we are
actively, as an administration, deploying the tools at our disposal to
try to identify those instances.”

Deese said that
inadequate oversight of oil futures markets “creates opportunities for
illegal activity,” adding that the administration is working to do
“everything that we can to be responsible and to deter that type of
activity.”

In an effort to counter those who downplay the
role that manipulation plays in raising oil and gasoline prices, Obama
pointed to Enron, the former Texas-based energy company.

“And
for anyone who thinks this cannot happen, just think back to how Enron
traders manipulated the price of electricity to reap huge profits at
everybody else’s expense,” he said during his remarks Tuesday.

Obama
took several shots at Republicans in Congress, arguing that GOP efforts
to repeal the Dodd-Frank financial reform law would preclude the
administration from preventing manipulation that could cause gasoline
price spikes.

“So I’d point out that anybody who’s pledging
to roll back Wall Street reform, Dodd-Frank, would also roll back this
vital consumer protection along with it,” Obama said. “We should
strengthen protections for American consumers, not gut them.”

Obama’s
remarks come amid aggressive Republican attacks on the president’s
energy policies. The GOP has worked for months to pin the blame for
high gasoline prices on the White House, arguing that the
administration isn’t doing enough to expand domestic oil-and-gas
production.

The president, in a slew of high-profile energy
speeches in recent weeks, has sought to undercut GOP criticisms,
touting his “all-of-the-above” energy plan and highlighting his
administration’s efforts to expand drilling.

But Obama
acknowledged Tuesday that his plan to increase oversight of energy
markets likely won’t have a short-term effect on gasoline prices.

“Let
me close by saying none of these steps by themselves will bring gas
prices down overnight,” Obama said. “But it will prevent market
manipulation and make sure we’re looking out for American consumers.”

The
president’s pl an calls on Congress to back a six-fold increase in
funding for CFTC staff charged with overseeing oil futures trading.
Obama also called for funding for advanced technology at the CFTC to
better monitor energy markets.

Obama urged Congress to
increase civil penalties on firms found to be manipulating the market,
from $1 million to $10 million. Those penalties would be imposed for
every day the violation occurs, rather than per violation, as they are
now. He likewise called for an increase in criminal penalties from 
$1
million to $10 million.

In addition, the president pressed
Congress to increase margin requirements, or the amount of collateral
that traders must post, in oil futures markets.

Lastly,
Obama said the administration plans to better analyze CFTC data to
identify potential manipulation. The last part of the plan does not
require action by Congress.



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