UPDATE 2-Obama, taking aim at Big Oil, says gas prices hurt

* Gasoline prices a headwind for US economy - Obama

* Says don't pay Big Oil at the gas pump and via tax code

* Don't let prices rocket up, parachute down - White House

* Attorney General wants to see gas prices fall, too (AddsHolder, details)

By Matt Spetalnick

INDIANAPOLIS, May 6 (Reuters) - President Barack Obama said on Friday that high gasoline prices are sapping the spending power of Americans, as he tried to limit political fallout by linking it to public hostility toward oil companies.

"We've got high gas prices that have been eating away at your paychecks and that is a headwind that we've got to confront," Obama told auto plant workers in remarks to promote his policies to wean Americans from dependency on foreign oil.

Public anger over rising costs at the pump has put pressure on Obama to look for ways to provide quick relief for consumers as he seeks re-election in 2012.

Indiana is a presidential battleground state that Obama won narrowly in 2008. The White House said election politics played no role in its selection for a visit.

Opposition Republicans have sought to cast blame on the Democratic president for a surge in gas prices that is straining Americans' pocketbooks at a time of stubbornly high unemployment and sluggish economic recovery.

Gasoline prices have jumped by more than $1 a gallon (3.8 liters) over the past year. Retail prices averaged nearly $4 a gallon on Friday, according to the motorist group AAA.

In a bid to deflect voters' anger, Obama has called for an end to tax breaks for oil and gas companies, opened a probe of market speculators and urged world producers to raise output.

Analysts say such measures were unlikely to have much impact. But it touched a popular nerve on Friday.

"If you are already paying them at the pump, we don't need to pay them through the tax code," he said to cheers from plant workers who will start making hybrid transmissions in 2013.

"We do not need to do it. Especially at a time when we're scouring every part of the budget to try to figure out how we can bring down our deficit and our debt," he said.

GAS PRICE TASK FORCE

Obama's remarks followed meetings on Thursday between his administration and lawmakers from both parties to cut the bloated U.S. budget deficit, which worries Americans and will be a major theme in the 2012 election for both parties.

Obama wants Congress to roll back $4 billion in "unwarranted tax subsidies" enjoyed by increasingly profitable oil giants. Republicans say that would amount to a tax increase on energy supplies and would be counterproductive.

Global oil prices have surged in recent months on unrest in the Middle East and growing global demand for energy, but they fell steeply on Thursday to under $100 per barrel. The White House says the drop in prices ought be passed along to U.S. consumers in the form of lower gasoline price.

U.S. Attorney General Eric Holder on Friday directed a special task force to look at whether gasoline prices fall in line with the big drop in oil prices, and if not, whether it is because of fraud or market manipulation.

"If wholesale prices continue to decrease, fraud or manipulation must not be allowed to prevent price decreases from being passed on to consumers at the pump," Holder said in a memorandum to a special task force working group set up to probe possible fraud and manipulation in the energy markets.

White House press secretary Jay Carney agreed, saying the administration will "make sure that we don't have a what I've heard described as a 'rockets-and-parachutes phenomenon,' where prices at the pump rocket up when oil prices rocket up, and yet they come down in a parachute fashion when oil prices go down." (Additional reporting by Jeremy Pelofky, Kim Dixon and Alister Bull in Washington; Editing by Deborah Charles and Jackie Frank)