WASHINGTON — President Obama pushed Congress on Tuesday to give oil market regulators more muscle to deter price manipulation by speculators, the latest White House response to determined Republican attacks on administration energy policies amid high gas prices at the pump.
Obama wants Congress to strengthen federal supervision of oil markets, increase penalties for market manipulation and empower regulators to increase the amount of money energy traders are required to put behind their transactions.
“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 at the White House.
The plan is more likely to draw sharp election-year distinctions with Republicans than have an immediate effect on prices at the pump. The measures seek to boost spending for Wall Street enforcement at a time when congressional Republicans are seeking to limit the reach of federal financial regulations.
The president’s $52 million proposal comes as Republicans have been hammering Obama on his energy policies, recognizing the political cost of high gas prices on the president. Obama’s plan would turn the tables on Republicans by taking aim at Wall Street’s role in the oil price chain.
Obama was joined during his Rose Garden remarks by Attorney General Eric Holder, Treasury Secretary Timothy Geithner, Commodity Futures Trading Commission Chairman Gary Gensler, and Federal Trade Commission Chairman Jon Leibowitz.
Obama didn’t shy away from casting the issue in partisan terms, drawing attention to GOP opposition to a plan to end oil and gas companies’ tax breaks.
“So here’s a chance to make amends,” the president said.
Even before the White House announced Obama’s plans, House Speaker John Boehner called it a political ploy and criticized the president for not using authority he already has to deal with such problems.
“The president has all the tools available to him if he believes that the oil market is being manipulated,” Boehner said Tuesday. “Where’s his Federal Trade Commission? Where is the SEC? He’s got agencies there. So instead of just another political gimmick, why doesn’t he put his administration to work to get to the bottom of it?”
Boehner used the acronym for the Securities and Exchange Commission, whose duties include regulating markets.
Senior administration officials who put together the proposal stopped short of blaming market manipulation for rising gas prices, but said they wanted to curtail the ability of speculators to take unlawful advantage of oil price volatility.
“The price is affected by a variety of factors,” said Brian Deese, the director of the White House’s National Economic Council. “Obviously, instability in the Middle East as well as growth projections across the globe are affecting global oil markets all the time.”
Meanwhile, the average price of gas at the pump has dropped slightly but is still higher than it was at this time last year.
“None of these steps by themselves will bring gas prices down overnight,” Obama said. “But it will prevent market manipulation and make sure we’re looking out for American consumers.”
Democrats promptly tested Republican support. House Democrats tried to attach an amendment to an unrelated hunting bill Tuesday that would have provided the CFTC with a version of the manipulation-fighting resources Obama sought.
It was defeated 261-160 with all but one Republican and 25 Democrats voting against it, including Rep. Mike Michaud, D-2nd District. Rep. Chellie Pingree, D-1st District, voted in favor of the amendment.
At issue is the increasing role of investment in oil futures contracts by pension funds, mutual funds, hedge funds, exchange traded funds and other investors. Much of that money is betting that oil prices will rise. Analysts say it is possible that such speculation has somewhat inflated the price of oil.
At the same time, investors can also bet that prices will go down – indeed, speculators have been credited for low natural gas prices. Studies of the effects of speculation on oil markets indicate that it probably increases volatility, but doesn’t have a major effect on average prices.
Citing such evidence, Charles T. Drevna, president of the American Fuel and Petrochemical Manufacturers, said refiners count on the financial markets to hedge against higher crude oil costs. He urged Obama to instead focus on transporting oil from Canada through the Keystone XL pipeline that Obama has blocked.
The White House effort comes as Republicans have talked of limiting the reach of a financial regulation overhaul that Congress passed in 2010 over their objections. Though the House Republican budget, which calls for sharp cuts in government programs, does not specify reduction in spending by the trading commission, the administration officials said that if the cuts were applied, the commission would lose more than five times what it spends on regulating energy markets.
The debate will pit Republicans who blame high gasoline prices on Obama who, in turn, blames Republicans for coddling Wall Street.