The Obama administration has launched a major investigation into possible price manipulation by oil companies and illegal trading by speculators, as gasoline prices threaten to top 2008 record highs.
U.S. Attorney-General Eric Holder made no allegation of wrongdoing against companies or speculators on Thursday. But the multiagency Financial Fraud Enforcement Working Group will play a key role in identifying fraud in the energy market, he said.
Consumers deserve to know whether higher pump prices are the result of collusion or market manipulation, Mr. Holder said.
"We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity," he said in a release. "If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action."
The enforcement agencies include the Department of Justice, the Federal Trade Commission, and the Commodity Futures Trading Commission, which is responsible for policing the future markets where oil and gas prices are essentially set.
The average pump price in the U.S. hit $3.84 a gallon on Thursday, the highest level since September 16, 2008. Canadian prices averaged $1.33.3 a litre this week, as they climb towards the 2008 record higher of $1.40 a litre set in July 2008.
There has been little action from the Canadian government on higher gas prices, though Industry Minister Tony Clement did announce Ottawa would increase inspection of gas pumps to ensure they are reliable.
Several industry analysts dismissed the enforcement action as politically motivated window dressing designed to demonstrate action in the face of consumer anger over rising pump prices. With prices climbing towards $4 U.S. a gallon south of the border, President Barack Obama is feeling the heat.
"You can almost set your watch on these kinds of things," Tim Evans, energy analyst with Citi Futures Perspectives, told Reuters news service.
"Every time we see a significant rally in oil prices, people start calling their legislators and encouraging them to launch an investigation. Will they find evidence of manipulation? I have no idea. The vast majority of past investigations have found no evidence of wrongdoing."
While consumers typically blame oil companies for the price spikes, the government will focus closely on speculative markets, said Michael Greenberger, former director of trading and markets at the Commodity Futures Trading Commission.
Mr. Greenberger said there is strong evidence that excessive - and often illegal - speculation can drive energy markets. He pointed to Enron Corp.'s manipulation of California electricity markets and to Amaranth Advisors LLC activities in controlling large positions in the natural gas market when it went bankrupt in 2006.
Former Amaranth trader Brian Hunter, who worked out of Calgary, was slapped on Thursday with a $30-million (U.S.) fine by the Federal Energy Regulatory Commission after being found to have engaged in illicit trading.
There have been preliminary inquiries by the CFTC and the FTC that may well have turned up evidence of wrongdoing, Mr. Greenberger said.
"If there are grand juries investigations opened up and indictments being brought down, I have every confidence the price of the commodities will start to drop," he said.
The American Petroleum Institution - which represent the oil industry - said the higher prices are caused by rising demand from emerging markets like China and India, and the supply disruption and ongoing political risk in Libya and the Middle East.