By Nicholas Johnston and Roger Runningen - Apr 21, 2011 12:29 PM PT
President Barack Obama said a Justice Department probe will examine the role of “traders and speculators” in oil markets and how they contribute to high gas prices.
“The attorney general’s putting together a team whose job it us to root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators,” Obama said today in Reno, Nevada. “We are going to make sure that no one is taking advantage of American consumers for their own short-term gain.”
The administration today created a working group to explore whether oil and gasoline prices are being driven higher by illegal manipulation.
The group, which includes representatives of federal agencies and state attorneys general, will check for fraud, collusion or misrepresentation at the retail and wholesale level, the Justice Department said in a statement today. The group also will examine investor practices and the role of speculators and index traders in oil futures markets.
Obama faces political pressure over rising gasoline prices. Crude oil futures have increased 22 percent and gasoline surged 34 percent this year as Middle East unrest reduced supply and the global economic rebound bolstered fuel demand. Both futures contracts touched the highest levels this month since the records reached in 2008.
The average price nationwide of regular gasoline at the pump was $3.84 a gallon yesterday, the highest since Sept. 16, 2008, AAA said on its website.
“It hurts. Every time you go to work a big chunk of your paycheck is eaten up,” Obama said. “This gas issue is serious.”
The president is on a cross-country trip to sell his deficit reduction plan, speaking today in Reno after earlier holding town-hall discussions in Palo Alto, California and Annandale, Virginia.
The White House and House Republicans have offered separate plans to reduce cumulative budget deficits by $4 trillion, over 12 years and 10 years respectively.
“We have to tackle this challenge,” Obama said today in Reno. “We’re going to cut spending in a way that’s fair” without damaging investments in such items as medical research and basic science, he said.
While the deficit dominates political debate in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago even as Treasury Department data show that the amount of marketable debt outstanding has risen to more than $9 trillion from about $4.3 trillion in mid-2007. The yield on the benchmark 10-year note is below the average of about 7 percent since 1980 and the average of 5.48 percent in 1998 through 2001, the last time the U.S. had a budget surplus, according to Bloomberg Bond Trader prices.
Ten-year yields fell 1 basis point, or 0.01 percentage point, to 3.40 percent at 2:32 p.m. in New York, according to Bloomberg Bond Trader prices. The Dow Jones Industrial Average rose 0.2 percent to 12,481.69 at 3:14 p.m., after surging 1.5 percent yesterday to its highest closing level since June 2008.
In addition to negotiations between the administration and Congressional Republicans over long-term federal spending, Congress must soon act to raise the federal debt limit.
‘Immediate Spending Cuts’
Virginia Representative Eric Cantor, the No. 2 Republican in the U.S. House, said today that his party won’t agree to a debt-limit increase “without binding budget reforms and immediate spending cuts.”
Asked about Cantor’s comment, White House press secretary Jay Carney told reporters traveling with Obama on Air Force One that it’s “risky” for Cantor to suggest that “if he or others did not get what they wanted, that they would then throw the government into default.”
While traveling in the western U.S., Obama is attending fundraising events in San Francisco and Los Angeles that are expected to bring in between $4 million and $5 million. The president returns to Washington tomorrow.