Whatever Happened to the Task Force on Oil Speculation?

Washington – When oil and gasoline prices soared last April, President Barack Obama announced to fanfare that the Department of Justice would lead a task force designed to root out manipulation of the oil market and gouging of consumers at the gas pump.

Since then the group has met only a handful of times and has never reported to the public.

The Oil and Gas Price Fraud Working Group has met only four or five times since its creation last April 21, and most of those meetings came at the time of its inception. Back then, Obama promised that the group would “root out any cases of fraud or manipulation” and noted that its scope would include the “role of traders and speculators.”

Although the task force was announced during a time when Obama's poll numbers were sagging and he left the impression that it was investigative in nature, it's actually a subset of the Financial Fraud Enforcement Task Force, an independent entity.

Far from being a new sheriff in town, the oil and gasoline working group assembles regulators from several agencies with overlapping jurisdiction to discuss what they're looking into separately, see what information they can legally share and compare experiences.

An official from the Department of Justice, demanding anonymity because of a lack of authorization to speak to journalists on the matter, confirmed that the panel is acting as a clearinghouse, hoping that sharing information from one agency might push another forward.

That may prove little comfort for consumers, who are watching gasoline prices soar again and asking why.

Back on April 21, gasoline prices had climbed 30 cents a gallon to a nationwide average of $3.84 in a single month, which led to the president's announcement. As of Thursday, gasoline prices stood at $3.73, an increase of 29 cents from a month earlier.

The Justice Department-led working group is concerned about rising prices, said Adora Andy, a spokeswoman for the department. “With the recent increase of gasoline prices, the working group is monitoring the situation, and if we find any evidence of criminal behavior or other misconduct we will respond immediately,” she told McClatchy.

McClatchy has learned that the task force is assisting the Federal Trade Commission in a probe into the practices of U.S. refiners, which turn crude oil into gasoline, diesel and jet fuel and other products.

In a letter Dec. 5 to Sen. Maria Cantwell, D-Wash., FTC Chairman Jon Leibowitz acknowledged that the probe into refiners is receiving support from task force members. Under pressure from lawmakers, the FTC began trying last spring to determine whether refiners engaged in anti-competitive practices or manipulation to drive up gasoline prices or keep them artificially high.

“In addition, the commission is conducting other, nonpublic investigations in the petroleum sector,” Leibowitz wrote to Cantwell in the letter McClatchy obtained.

First approached by McClatchy in late February, the FTC was mum about developments in the eight months since its probe into refiners was announced.

“We have no comment,” said Mitchell Katz, an agency spokesman.

The agency changed gears Thursday after Sens. Charles Schumer, D-N.Y., and Claire McCaskill, D-Mo., released a copy of a letter they sent to Leibowitz pressuring the FTC to wrap up its probe.

“Major refiners and oil companies are continuing to make record profits, yet American families are still faced with gasoline at record prices. Those higher gasoline prices are having a significant negative economic impact on American consumers and on the American economy,” the two senators said. “The commission's investigation into whether refiners are actually manipulating the market to keep prices artificially high is critical — as is timely issuance of the results of such investigation.”

In a statement late Thursday, Leibowitz pushed back.

“The Federal Trade Commission launched an investigation in June 2011 into pricing anomalies in the petroleum industry. The investigation is active and ongoing. We are keenly aware of the impact high gasoline prices have on consumers, and we are moving ahead with the investigation expeditiously,” he said.

Refiners say the high price of gasoline stems directly from soaring oil prices, since oil makes up an estimated 70-80 percent of the cost of gasoline. Interviewed Wednesday, the head of the newly rebranded refiners trade association expressed confidence that the FTC probe will come up empty.

“One of my goals in life is to have the results of these investigations trumpeted with the same enthusiasm as the call for them,” said Charles Drevna, the president of American Fuel & Petrochemical Manufacturers, until recently called the National Petrochemical and Refiners Association. “The point being is, it makes for great political theater, but these politicians don't have the guts to come up in front of a microphone and say, 'I called for this investigation. We went through and we found nothing.' “

Republicans have sought to score political points from the rising gas prices, suggesting that the Obama administration's energy policies have restricted supplies or sent bad signals to financial markets about future supplies.

However, the latest Energy Department data, for the week ending Feb. 24, points to ample oil and gasoline inventories, on the high side of historical norms. That suggests oil and gasoline prices are disconnected from supply-and-demand market fundamentals. It's led at least one regulator to conclude that excessive financial speculation is sharply driving up oil and gasoline prices again.

“There is currently ample supply and limited demand, which should not push prices to the places they are today,” said Bart Chilton, a Democratic commissioner on the five-member Commodity Futures Trading Commission, which regulates the trading of futures — contracts for future deliveries of oil and other commodities. “Financial regulators are not price setters, but we are supposed to ensure prices are fair, and I am concerned that today they are not. There is a speculative premium being paid by consumers and businesses alike.”

Financial-sector trade groups are suing the Commodity Futures Trading Commission, trying to block the implementation of congressionally mandated limits on how many contracts any one trader or company can control. Historically, financial speculators who never take delivery of oil made up about 30 percent of the trading in oil futures contracts; today they're about 65 percent of the market. That's led Chilton and other critics to think that the reversed ratio explains the high and volatile oil and gasoline prices.

“The only tool regulators have in their utility belt to address excessive speculation is the ability to limit the number of contracts that a trader may control. Most of us know what too much concentration can do, and it usually isn't very pretty,” he told McClatchy. “Our position-limit rule has yet to be implemented, yet at the same time, Wall Street banks are taking the regulator to court to stop the rule from going forward. They want the ability to speculate with no limits. That's not good for markets, for our economy, or for consumers or businesses.”

Obama noted in a speech Thursday that when “uncertainty increases, speculation on Wall Street can drive up (oil) prices even more.”

© 2012 McClatchy-Tribune Information Services

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