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House Democrats urge regulators to investigate gas prices

By CHRISTOPHER S. RUGABER
04.25.08, 5:00 PM ET

http://www.forbes.com/feeds/ap/2008/04/25/ap4936156.html

WASHINGTON - House Democratic leaders urged federal regulators Friday to investigate whether market manipulation has contributed to record-high gas prices of nearly $3.60 a gallon.

House Speaker Nancy Pelosi, D-Calif., and six other members of the House leadership urged the Federal Trade Commission to use new authority to investigate the oil and gas markets for price manipulation and other fraud.

"Recent price volatility and investor speculation in the oil market require the diligent oversight Congress called for, especially when oil prices break records daily, hitting $119 per barrel this week," the letter said.

Pelosi's request comes as skyrocketing oil and gas prices are taking on a higher political profile. Sen. Barack Obama on Friday blamed gas prices "approaching $4 a gallon" on the failure of Washington politicians to stand up to oil companies.

And a group of senators on Thursday urged President Bush to halt billions of dollars in sophisticated arms sales to Saudi Arabia and several other Gulf oil producers unless they agree to pump more petroleum.

The pressure may increase next week, as Exxon Mobil Corp. (nyse: XOM - news - people ) is expected to report a huge quarterly profit. Wall Street analysts project that the company will report net income of more than $11 billion for the first quarter.

Mitchell Katz, a spokesman for the FTC, said the agency received the letter and will "respond to it quickly." He declined to comment on whether the agency would launch an investigation.

Lawmakers pressed FTC Chairman William Kovacic during an April 8 Senate hearing to issue regulations that would enable the agency to use its new authority to penalize manipulation. Last year's energy bill gave FTC greater oversight.

Kovacic said the agency would take a key step in that process by the end of this year.

"This is a high priority for us," he told Sen. Maria Cantwell, D-Wash., who complained that gas and diesel prices had already topped $4 a gallon in her state.

Last August, the FTC issued a report that found no evidence of market manipulation by oil and gas companies after gas prices spiked to more than $3 per gallon during the summer of 2006. That study was requested by President Bush under the agency's antitrust authority.

John Felmy, chief economist at the American Petroleum (otcbb: AMPE.OB - news - people ) Institute, said high gas prices are largely due to soaring oil prices, which have jumped by $40 per barrel in the past year. The institute represents 400 oil and gas companies, including Exxon Mobil and Chevron (nyse: CVX - news - people ) Corp.

"This is really market fundamentals going on," he said. "We've got very strong demand from China and India .... and you've got tight supply" from countries such as Russia, Nigeria and Venezuela.

House Democrats urge regulators to investigate gas prices

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