RENO, Nevada (Reuters) - With U.S. gasoline pump prices soaring, the Obama administration on Thursday unveiled a working group of federal agencies to probe potential fraud in the energy markets.
The White House is worried that if average gas prices rise above $4 a gallon, the economic and political fallout could dominate next year’s presidential campaign and drown out President Barack Obama’s message of economic recovery.
Obama said there was no “silver bullet” to tame gasoline prices, but said he asked U.S. Attorney General Eric Holder to assemble a team of agency officials to “root out” cases of oil market fraud that affect pump prices, including actions by speculators.
“We are going to make sure that no one is taking advantage of the American people for their own short-term gain,” Obama said in prepared remarks to a townhall-style meeting in Nevada.
Earlier, the Justice Department announced the working group, which will include representatives from the Commodity Futures Trading Commission, the Federal Trade Commission, the Federal Reserve Board, the Securities and Exchange Commission, as well as the Departments of Agriculture, Energy, Justice and Treasury.
Past attempts by U.S. regulators to investigate widespread gasoline market malfeasance have borne little fruit.
Obama devoted considerable time to the subject of rising gasoline prices this week — seeking to reassure Americans that there was enough global oil supply and blaming soaring gasoline prices on speculators.
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, Obama faces political pressure to act.
The group, which will be part of the administration’s Financial Fraud Task Force, will focus on any manipulation of oil and gas prices, collusion, fraud or other violations of state and federal laws, Holder said in a memo.
It will also examine investor practices, supply and demand factors and the role of speculators and index traders in the oil futures markets, according to his memo sent to the task force members.
A former federal enforcement official applauded the move and said he expected to see swift results.
“This is going to send a very strong signal to speculators and others who are committing malpractices in these markets, that there is a cop on the beat,” said Michael Greenberger, a University of Maryland law professor and former senior CFTC official.
But if past efforts are any indication, tracking down manipulation claims will be difficult. The federal government has launched several gasoline price investigations in past years — all of which yielded no evidence of manipulation or other wrongdoing.
Holder said he was acting on a March 11 request from Obama to look into rising energy prices and that during a subsequent meeting last month with task force members and state attorneys general they discussed pending inquiries in some states.
They also talked about “areas that require additional exploration, including whether there is any evidence of unlawful price manipulation at the supplier level or higher,” Holder said in the memorandum released by the Justice Department.
Additional reporting by Jeremy Pelofsky, James Vicini and Christopher Doering; Editing by Vicki Allen