In the Rose Garden this morning, President Obama spoke strongly about the need to crack down on the Wall Street speculation that leads to higher consumer gas prices. “We can't afford a situation where speculators artificially manipulate markets by buying up oil, creating the perception of a shortage, and driving prices higher—only to flip the oil for a quick profit,” he said. “We can’t afford a situation where some speculators can reap millions, while millions of American families get the short end of the stick. That’s not the way the market should work. And for anyone who thinks this cannot happen, just think back to how Enron traders manipulated the price of electricity to reap huge profits at everybody else’s expense.”
The White House outlined five steps oday to address the problem:
A six-fold increase in the surveillance and staff budget of the Commodity Futures Trading Commission.
Information technology upgrades at CFTC.
Substantially increasing penalties for energy market manipulation.
Empowering the CFTC to raise margin requirements in oil futures markets, which should reduce volatility and price disruptions
Executive orders to improve intergovernmental data sharing with the CFTC
These are all noble ideas, and ones that should be enacted. There’s just one small problem: all but one rely on Congressional action. And there is absolutely no chance Republicans will help Obama lower gas prices before a presidential election.
It is completely fair, and wise, for Obama to explain the policies he favors for combating oil price speculation, regardless of their viability. When Republicans block them, he can use it as a defense against their attacks about Keystone XL, or whatever other talking point the GOP uses to unfairly blame the president for high gas prices.
But if Obama is actually interested in addressing the problem, there are more things he coulddo —namely, he could get the Justice Department, which also has the ability to oversee malfeasance in energy markets, to crack down on speculators. “The administration should subpoena major traders and conduct a real investigation into the role that speculators have in increasing gas prices for working Americans,” said Tyson Slocum of Public Citizen.
If that’s sounds like a familiar idea—it is. One year ago, with much fanfare, the administration announced the formation of the Oil and Gas Price Fraud Working Group, with representatives from Justice, the CFTC, Treasury Department, state attorneys general, the Securities and Exchange Commission and other agencies working together to root out fraud in energy markets.
At the time, Attorney General Eric Holder had stern words for shady speculators. “We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity,” he said. “If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action.”
Unfortunately, that working group has done exactly nothing in the year since it was created. There have been no subpoenas, no indictments and, according to a McClatchy story last month, “the group has met only a handful of times and has never reported to the public.” (This is a cautionary tale for those who want to see serious action from the recently announced federal inquiry into Wall Street malfeasance leading up to the financial crisis.)
Again, all of the steps Obama outlined today are crucial to cracking down on oil market speculation. They should be enacted. But they won’t be this year, and the White House knows it—and should take real action to fight speculators in the meantime. Even one indictment might serve to settle other speculators down.