By Kevin G. Hall and Lesley Clark, McClatchy Newspapers –
WASHINGTON — Utilizing the bully pulpit in an attempt to push down stubbornly high oil prices, President Barack Obama on Tuesday announced five steps to strengthen oversight of the financial markets where contracts for future delivery of crude are traded and proposed increased funding for regulators to monitor these markets.
The president made remarks in the White House Rose Garden, flanked by Treasury Secretary Timothy Geithner, Attorney General Eric Holder and the heads of agencies that monitor oil trading and combat price-gouging of consumers. Obama suggested that financial speculators were running up the price of oil at the expense of American motorists.
“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,” Obama 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.”
Calling for “more cops on the beat to monitor activity in energy markets,” Obama also proposed an increase in civil and criminal penalties for illegal energy market manipulation and other activities. As a means of discouraging speculation, he proposed having Congress require that Wall Street traders put more money aside to pay off the bets made on oil contracts. And he called for toughening financial penalties tenfold and imposing penalties for every day a violation occurs.
The high oil prices — above $104 a barrel on the New York Mercantile exchange at Tuesday’s close — are politically damaging to the president’s re-election chances. Gasoline prices on Tuesday averaged $3.904 nationwide for a gallon of unleaded gasoline — within 21 cents of the all-time high set in 2008.
While pump prices make up a small percentage of the spending of most American families, they carry heavy psychological weight on consumer sentiment. Motorists have few alternatives to gasoline and visit the filling station weekly.
In a briefing for reporters ahead of the president’s Rose Garden statement, a senior White House official refused to say whether the new effort would have any effect on oil prices. In fact, if everything the president proposed was enacted by Congress, it isn’t clear it would necessarily make a difference in price. That’s because the president’s plan seeks to attack illegal manipulation of prices, while experts think much of today’s high prices has to do with excessive but legal financial speculation.
“We welcome additional funding for the (Commodity Futures Trading Commission) and more cops on the beat,” Dennis Kellher, president of the advocacy group Better Markets, said in a statement. “But the problem with rising oil and gas prices is excess speculation. Claiming to ‘crack down’ on manipulation and ‘single traders’ will do nothing to stop Wall Street speculators from running amok in the commodity markets. Wall Street pours hundreds of billions of dollars into the commodity markets every month to speculate, and that is causing prices to jump.”
Obama acknowledged that the “none of the steps by themselves will bring gas prices down overnight.” But, he said, “it will prevent market manipulation and make sure we’re looking out for American consumers.”
Opponents of the president weren’t inclined toward new curbs on Wall Street, and Republicans accused him of grandstanding.
“If I were to guess, I’d say today’s proposal by the president probably polls pretty well. But I guarantee you it won’t do a thing to lower the price of gas at the pump,” Senate Minority Leader Mitch McConnell, R-Ky., said in a scathing statement. “It never has in the past. White House officials admit as much. Why it would it now?”
Republican presidential front-runner Mitt Romney accused Obama of governing “by gimmick” and favoring regulations over energy production.