* 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 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 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
"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]
MOST EXPENSIVE SINCE 2008
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
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
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
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
(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)