U.S. President Barack Obama pushed Congress Tuesday to give oil market regulators more muscle to deter price manipulation by speculators, the latest White House response to determined Republican attacks on administration energy policies amid high gas prices at the pump.
Obama wants Congress to strengthen federal supervision of oil markets, increase penalties for market manipulation and empower regulators to increase the amount of money energy traders are required to put behind their transactions.
"We can't afford a situation where some speculators can reap millions while millions of American families get the short end of the stick," Obama said at the White House.
Obama's plan calls on Congress to:
- Increase six-fold the surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation.
- Increase spending on technology to provide better oversight and surveillance of energy markets.
- Increase civil and criminal penalties against firms that engage in market manipulation from $1 million to $10 million.
- Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.
The plan is more likely to draw sharp election-year distinctions with Republicans than have an immediate effect on prices at the pump. The measures seek to boost spending for Wall Street enforcement at a time when congressional Republicans are seeking to limit the reach of federal financial regulations.
The president's $52 million proposal comes as Republicans have been hammering Obama on his energy policies, recognizing the political cost of high gas prices on the president. Obama's plan would turn the tables on Republicans by taking aim at Wall Street's role in the oil price chain.
Obama was joined during his Rose Garden remarks by Attorney General Eric Holder, Treasury Secretary Timothy Geithner, Commodity Futures Trading Commission Chairman Gary Gensler, and Federal Trade Commission Chairman Jon Leibowitz.
'Just another political gimmick,' Boehner alleges
The president didn't shy away from casting the issue in partisan terms, drawing attention to Republican opposition to a plan to end tax breaks for oil and gas companies.
"So here's a chance to make amends," he said.
Even before the White House announced Obama's plans, House Speaker John Boehner called it a political ploy and criticized the president for not using authority he already has to deal with such problems.
"The president has all the tools available to him if he believes that the oil market is being manipulated," Boehner told reporters Tuesday. "Where's his Federal Trade Commission? Where is the SEC? He's got agencies there. So instead of just another political gimmick, why doesn't he put his administration to work to get to the bottom of it?"
Boehner used the acronym for the Securities and Exchange Commission, whose duties include regulating markets.
Senior administration officials who put together the proposal would not go as far as to say that market manipulation is responsible for rising gas prices, but the officials said they wanted to curtail the ability of speculators to take unlawful advantage of oil price volatility. The officials spoke on the condition of anonymity to discuss details of the plan.
"None of these steps by themselves will bring gas prices down overnight," Obama said. "But it will prevent market manipulation and make sure we're looking out for American consumers.
At issue is the increasing role of investment in oil futures contracts by pension funds, mutual funds, hedge funds, exchange traded funds and other investors. Much of that money is betting that oil prices will rise. Analysts say it is possible that such speculation has somewhat inflated the price of oil.
At the same time, investors can also bet that prices will go down — indeed, speculators have been credited for low natural gas prices. Studies of the effects of speculation on oil markets indicate that it probably increases volatility, but doesn't have a major effect on average prices.
The average price of a gas at the pump has dropped slightly but is still higher than it was at this time last year.
The White House effort comes as Republicans have talked of limiting the reach of a financial regulation overhaul that Congress passed in 2010 over their objections. Though the House Republican budget, which calls for sharp reductions in government programs, does not specify reduction in spending by the trading commission, the administration officials said that if the cuts were applied the commission would lose more than five times what it spends on regulating energy markets.
The debate will pit Republicans who blame Obama for high gasoline prices against a White House that blames Republicans for coddling Wall Street.