Obama to launch ‘crackdown’ on oil market manipulation

President Obama will offer a plan Tuesday to boost oversight of oil markets and “crack down” on potential manipulation, the White House said.

Obama is slated to deliver a Rose Garden statement later this morning, the latest in a slew of recent energy-related speeches and remarks as the White House seeks to limit political damage from high gasoline prices.

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Prices have risen sharply this year but recently leveled off and dropped slightly to a national average of $3.90 per gallon, according to AAA.

A senior administration official declined to speculate on the effect these measures could have on oil and gasoline prices.

“I don’t think you’ll find any of us speculating about prices one way or another,” the official said, adding that prices are set on world markets based on a slew of complicated factors.

Obama’s plan sets up a clash with Republicans in Congress, who argue that plans to reign in speculation are a distraction from GOP efforts to dramatically expand domestic oil-and-gas exploration.

Obama will push Congress to boost penalties for market manipulation, toughen federal supervision, and allow regulators to increase the collateral that traders in futures markets must post, according to an administration official. The president will also seek to boost funding for enforcement.

“At a time when American consumers are feeling pain at the pump, it is critically important to ensure that illegal manipulation, fraud and market rigging are not contributing to gas price increases,” the White House said.

Democratic leaders say GOP spending plans do not provide enough resources to the Commodity Futures Trading Commission.

The plan arrives as many Democrats are alleging that “excessive” speculation in futures markets – and potential market manipulation – is driving up oil and gasoline prices well beyond what supply and demand fundamentals should dictate.

They frequently make the arguments to counter GOP calls to expand oil-and-gas leasing far beyond Obama administration plans.

Republicans seeking expanded domestic drilling have downplayed the role speculation plays in raising prices, or offer a take that's different from Democrats'.

Some Republicans argue that expanding drilling to areas such as the Atlantic Coast and Alaska's Arctic National Wildlife Refuge would lower costs by sending a market signal to speculators that more supply is in the offing, even if it is years away.

The president will outline a five-part plan during his remarks later Tuesday. He will call on Congress to back a six-fold increased in funding for CFTC staff charged with overseeing oil futures trading. He’ll also call for funding for advanced technology at the CFTC to better monitor energy markets.

Obama will also call for increasing civil penalties on firms found to be manipulating the market from $1 million to $10 million. Those penalties would be imposed for every day the violation occurs, rather than per violation, as they are now. He’ll also urge Congress to increase criminal penalties from $1 million to $10 million.

In addition, the president will press Congress to increase margin requirements, or the amount of collateral that traders must post, in oil futures markets.

Lastly, the administration plans to better analyze CFTC data to “look for patterns and better understand trading activity in energy markets.” The last part of the plan does not require action by Congress.

The new White House plan, first reported by The Associated Press, arrives five weeks after Obama, at a press conference, said he was tasking Attorney General Eric Holder with “reconstituting” a Justice Department-led panel formed in 2011 to explore potential manipulation that might affect gasoline prices.

A senior administration official, pressed by reporters, declined to name specific examples of market manipulation uncovered by the panel.

“We’re not suggesting that there isn’t evidence of manipulation,” the official said, directing questions to the Justice Department.

“Whether it’s Enron or any other case, you can point to areas where the lack of adequate oversight, the lack of cops on the beat, and the lack of serious rigor in overseeing these markets has been a serious problem for consumers,” the official said.

Oil and gasoline prices are at the heart of election-season political battles. But most experts caution that there's very little that policymakers can do to affect gasoline costs, especially in the near-term, because they're tethered to oil prices set on global markets.

This story was updated at 10:16 a.m.