President Barack Obama urged Congress to bolster federal supervision of oil markets, including bigger penalties for market manipulation and greater power for regulators to increase the amount of money traders must put up to back their energy bets.
Obama asked Congress to fund a six-fold increase for surveillance and enforcement staff at the Commodity Futures Trading Commission to put “more cops on the beat” overseeing oil markets.
He also is seeking to give the CFTC new authority to raise margin requirements for traders’ oil positions and stiffen civil and criminal penalties for businesses that are guilty of market manipulation to $10 million from $1 million. The plan would cost $52 million.
“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 in remarks in the White House Rose Garden today.
The price of gasoline has emerged as an issue in the 2012 presidential campaign and raised concern that it may slow economic growth by pinching consumer spending. Obama has been seeking to set out his differences with Republicans. Mitt Romney, the likely Republican nominee, has accused the Obama administration of thwarting domestic oil production through regulations.
Republicans control the House of Representatives and have enough votes in the Senate to block legislation, making prospects for passage of Obama’s proposal dim.
House Speaker John Boehner, who endorsed Romney today, said the government already has all the tools it needs in the CFTC and the Securities and Exchange Commission if Obama believes the market is being manipulated.
“Instead of just another political gimmick, why doesn’t he put his administration to work to get to the bottom of it?” the Ohio Republican said at a news conference in Washington.
“To blame speculators for reflecting the fundamentals of the market is far stretched,” Flynn said. “If they raise the margins too high, it’s going to make the market less transparent, it’s going to force money overseas.”
Brian Deese, deputy director of the White House National Economic Council, said at briefing after Obama spoke that the proposals are aimed at maintaining public and market confidence at “a time of particular volatility.”
While the CFTC and Federal Trade Commission already are investigating potential market manipulation, Deese said the administration is “trying to stay as aggressive as we can.”
The average retail price for a gallon of regular gasoline was $3.904 as of yesterday, according to the American Automobile Association’s daily survey. That’s up from $3.833 a year ago. Prices may have peaked. Futures for May delivery fell for the third day to $3.2262 a gallon at 12:25 p.m. on the New York Mercantile Exchange.
Obama has been discussing international oil markets with counterparts in the Group of Eight, whose leaders he will host at a Camp David summit on May 18-19.
Last week, the president discussed the global oil market in a videoconference with French President Nicolas Sarkozy as the U.S. and its allies continue to monitor the economic impact of energy costs.
Officials in France and the U.K. said last month that the allies have talked about whether to tap strategic petroleum stockpiles to keep prices in check. The U.S. has said that no decision has been made.
The discussions coincide with efforts led by the U.S. to force Iran to end development work that may lead to building a nuclear weapon. Further U.S. sanctions on Iran are set to take effect by the end of June, about the same time a European Union embargo of Iranian oil kicks in. Iran is the second-largest producer in the Organization of Petroleum Exporting Countries.
Obama repeated today that events affecting the global market are the main reason for the rise in energy prices, including growth in emerging economies such as China and India and tension in the Middle East.
“Rising gas prices means a rough ride for a lot of families” Obama said in remarks in the White House Rose Garden. “When gas prices go up it’s like an additional tax that comes right out of your pocket.”
Still, he added, “there are no quick fixes.”
Crude oil for May delivery advanced $1.27 to $104.20 a barrel on the New York Mercantile Exchange, the highest settlement since April 2. Crude is up 5.4 percent this year.
John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy, said the CFTC “certainly needs more funding” given what they been asked to do to oversee markets. Still, he said, it likely would have little impact on energy costs.
“In commodities, if you want to see lower prices, you have to make more of it or use less of it,” Kilduff said.
To contact the editor responsible for this story: Steven Komarow at firstname.lastname@example.org