US President Barack Obama called for more aggressive measures to prevent oil-market manipulation, pledging stronger action by his administration and calling on Congress to fund enforcement and increase penalties for violators. “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 declared.
Obama said he has already asked US Atty. Gen. Eric H. Holder Jr. to work with Federal Trade Commission Chairman Jon Leibowitz, Commodity Futures Trading Commission Chairman Gary G. Gensler, and other federal regulatory agency chiefs “to make sure that acts of manipulation, fraud, or other illegal activity are not behind increases in the price that consumers pay at the pump.”
He also asked Congress to provide immediate funding “to put more cops on the beat” and upgrade technology so federal market oversight keeps pace with traders. Penalties should increase tenfold and apply not just to each violation but for every day that the violation occurs, he maintained. The president also asked lawmakers to give the agency overseeing oil markets authority to reduce volatility and decrease speculation by requiring traders to post appropriate margins, “which simply means that they actually have the money to make good on their trades.”
Obama said, “In the meantime, my administration will take new executive actions to better analyze and investigate trading activities in energy markets and more quickly implement the tough consumer protections under Wall Street reform.”
CFTC Commissioner Bart Chilton applauded Obama’s announcement. “It is critically important that we kick-start the bureaucracy and get speculative position limits in place, now,” he said on Apr. 17. “We have been turning procrastination into an art form by not doing what Congress and the president clearly told us to do. They mandated that we curb excessive speculation by implementing limits on the amount of a market any one trader can control.”
Gensler said he supports the president’s proposals, which he said build on progress the CFTC has made in making the unregulated swaps market more transparent and implementing new antifraud and antimanipulation reforms. “As markets include both hedgers and speculators, it is critical for market integrity that no single speculator is able to obtain an overly concentrated position,” he continued.
Other parts of the federal government have suggested that different factors may have had a greater influence on global crude prices. The US Energy Information Administration said that significant supply interruptions in Libya, South Sudan, Yemen, and Syria increased global market uncertainty. “Moderate disruptions stemming from technical issues have temporarily curbed production at some oil fields in Canada, Brazil, and China, but production is expected to recover in the near future,” it added in its Apr. 10 Short-Term Energy Outlook.
The Futures Industry Association and its new president, Walter L. Lukken, who was the CFTC’s acting chairman in 2007 and 2008, did not immediately comment on Obama’s announcement. Congressional Republicans generally criticized it, however. US House Natural Resources Committee Chairman Doc Hastings (Wash.) said it was more election-year politics while the administration continues to enact policies that make Americans rely more on crude oil imports from politically unstable foreign suppliers.
Contact Nick Snow at email@example.com.