WASHINGTON (Reuters) - President Barack Obama on Tuesday blamed speculators for driving gasoline prices higher and straining American consumers, saying there was enough oil in world markets to meet demand.
Speaking at a community college in suburban Virginia, Obama said increasing production of U.S. oil and creating a market for fuel-efficient cars would help meet the country’s energy challenges.
“I know that if you’ve got a limited budget and you just watch that hard-earned money going away to oil companies that will once again probably make record profits this quarter, it’s pretty frustrating,” he said.
Rising fuel prices are a persistent concern for the White House, which is worried about their impact on the economy and on voters’ wallets as Obama runs for re-election.
Average U.S. gasoline prices hit $3.84 a gallon last week, the most expensive since August 2008, as oil prices have soared above $100 a barrel.
With pump prices already above the key level of $4 a gallon in U.S. cities like Los Angeles, San Francisco and Chicago, there is political pressure on Obama to act.
Obama said that global oil supply is adequate and that speculators are driving up prices significantly.
“It is true that a lot of what’s driving oil prices up right now is not the lack of supply. There’s enough supply. There’s enough oil out there for world demand,” Obama said.
“The problem is ... speculators and people make various bets, and they say, you know what, we think that maybe there’s a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we’re going to bet that oil is going to go up real high. And that spikes up prices significantly.”
Obama’s comments echoed those of members of the Organization of the Petroleum Exporting Countries, which insists that markets are well supplied and that speculation drove oil to $127 a barrel for Brent crude and $113 a barrel for U.S. crude earlier this month.
Saudi Arabia said earlier this week that markets were actually oversupplied, forcing it to cut production by 800,000 barrels per day in March to counter slowing demand -- a strong signal the cartel would not act to quell soaring prices.
Energy Secretary Steven Chu said on Tuesday he was concerned that rising crude oil and gasoline prices could undermine U.S. economic recovery.
The International Energy Agency last week warned that oil prices over $100 a barrel for a sustained period would hurt the economic recovery, noting demand for oil was showing signs of weakening.
Obama said the government was in a position to investigate unfair speculation.
Two U.S. agencies that investigate potential energy market manipulation -- the Commodity Futures Trading Commission (CFTC) and Federal Trade Commission (FTC) -- recently agreed to share information on potential probes.
“We’re going to be monitoring gas stations to make sure there isn’t any price gouging that’s taking advantage of consumers,” Obama said.
The CFTC is also weighing new rules that would slap “position limits” on big commodity traders that would cap how many futures and related swaps contracts any one company can control. The rules, which have been under debate since commodity prices first surged to records in 2007 and 2008, are aimed at tempering wild price swings.
“There is a Wall Street premium on gas prices today,” CFTC Commissioner Bart Chilton, a strong advocate for imposing position limits, told Reuters.
“Every time folks fill up their tanks, they can expect that several dollars are due to speculation.”
Goldman Sachs, one of the largest investment banks in commodities, warned clients last week that oil prices could correct due to the level of speculative interest currently in the market.
Obama, who was unable to pass a comprehensive bill to revamp energy policy and fight climate change during his first two years in office, has identified energy reform as a priority in the second half of his White House term.
Additional reporting by Christopher Doering in Washington, David Sheppard and Matthew Robinson in New York; Editing by Cynthia Osterman and Deborah Charles