* Obama singles out oil traders and speculators
* Pump prices a rising political liability for Obama
* Past gasoline probes have borne little fruit (Adds oil market background, comment from API, analyst)
By Jeff Mason
RENO, Nevada, April 21 (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. [ID:nN05119768]
Obama 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, adding there is no "silver bullet" to tame gasoline prices.
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, Securities and Exchange Commission and 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 gas prices this week -- seeking to reassure Americans there was sufficient global oil supply and blaming soaring gasoline prices on speculators. [ID:nLDE73J08S]
Average U.S. gasoline prices hit $3.84 a gallon last week, the highest level 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, 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.
Others dismissed Obama's move as political expediency.
"You can almost set your watch on these kinds of things," said Tim Evans, an energy analyst at Citi Futures Perspective. "Every time we see a significant rally in oil prices, people start calling their legislators and encouraging them to launch an investigation."
The federal government has launched several gasoline price investigations in past years -- all of which yielded no evidence of manipulation or other wrongdoing.
The American Petroleum Institute, which lobbies for oil companies, said the Federal Trade Commission has tracked gasoline prices for more than a decade and "has said nothing to indicate fraud is a factor in today's higher prices."
Bets on rising crude oil prices made by hedge funds and other financial investors soared to an all-time high between mid-February and mid-March as unrest spread in the Middle East and North Africa.
As of last week, money managers still held U.S. futures contracts equivalent to 250 million barrels of oil, the most recent data from the U.S. futures market regulator showed.
That's roughly four times the volume held by money managers in July 2008 when crude oil prices peaked at almost $150 a barrel [CFTC/]. (Additional reporting by Jeremy Pelofsky, James Vicini, Tom Doggett and Christopher Doering in Washington and David Sheppard in New York, writing by Chris Baltimore; Editing by Vicki Allen and Todd Eastham)