Government steps up review of oil, commods price surge

WASHINGTON (Reuters) - U.S. regulators stepped up their efforts on Tuesday to determine why prices for oil and a range of other commodities have surged dramatically this year.

The Commodity Futures Trading Commission announced that an interagency panel, including the Federal Reserve, Treasury Department and others, will assess price increases and trading in a range of commodities.

"High commodity prices are posing a significant strain on U.S. households," the CFTC said.

Other regulators on the new panel include the Securities and Exchange Commission and officials from the Energy and Agriculture Departments.

At a meeting with top Wall Street energy market players, a CFTC official said the government must investigate the run-up in oil prices, which topped a record $139 a barrel last week.

"The bottom line is, we need to investigate, in a comprehensive and probing manner, what is happening in these markets before making a rush to judgment about what is or what is not causing these unusual price movements," said Bart Chilton, a member of the Commodity Futures Trading Commission, at a meeting of the agency's energy markets advisory panel.

Chilton, a Democrat, spoke after Treasury Secretary Henry Paulson asserted that speculators were not causing the run-up in oil prices.

"Perhaps the Secretary has a crystal ball, but I don't, and given what I'm seeing and hearing in the markets and from market users, that seems to me to be a premature determination, at best," Chilton said.

One member of the energy industry panel, John Heimlich of the Air Transport Association, questioned whether the trading arms of big Wall Street firms were benefiting from oil price forecasts from their firms' research divisions.

Heimlich noted that recent forecasts calling for higher oil prices have been followed by a spike in such investments.

"We have absolutely no connection with our research department," said Donald Casturo of Goldman Sachs.

The CFTC launched a nationwide investigation last December into possible manipulation of the U.S. oil market.

"The CFTC is committed to ensuring that our nation's futures markets operate fairly and efficiently, and that commodity prices are determined by the fundamental forces of supply and demand, rather than by abusive or manipulative practices," CFTC Chairman Walter Lukken said in remarks before the panel.

Bush Administration officials blame surging oil prices on limited supply and growing demand, not heightened speculation.

One member of the panel warned that oil prices will eventually fall and could wreak havoc in the markets. "This bubble when it bursts is going to do so in a very disorderly way," warned Sean Cota of Cota & Cota Oil & Propane.

The newly formed regulator panel will examine investor practices and fundamental supply and demand factors, and will study the role of speculators and index traders in the commodity markets, the CFTC said in a statement.

High prices for commodities such as wheat, corn and rice, along with oil, have roiled U.S. and world markets.

The U.S. Department of Agriculture is forecasting sharp increases this year in U.S. food prices, expected to rise by 5 percent in the largest increase since 1990.

(Reporting by Joanne Morrison; Editing by David Gregorio)