Blumenthal Calls On U.S. Attorney General To Crack Down On Abuses That Raise Gas Prices

(Hartford, CT) –U.S. Senator Richard Blumenthal (D-CT) today called on U.S. Attorney General Eric Holder to take immediate steps against abuses and speculators that raise gas prices. Blumenthal wrote a letter today to Holder asking that he make use of a task force formed nearly one year ago to investigate and prosecute speculation and fraud in energy markets that contribute significantly to recent spikes in oil prices. A new push for the Department of Justice to use its existing and wide-ranging authority to investigate and prosecute price manipulation aims to curb sharply rising gas prices and provide immediate stability for millions of consumers and businesses.

“Abusive and illegal speculation by market manipulators and foreign cartels trying to make a quick profit artificially drives up prices at the pump,” said Blumenthal. “Attorney General Holder must act immediately to revive his critical task force and more aggressively pursue the high-risk gamblers who rob consumers at the pump and threaten our fragile economic recovery.”

On April 21, 2011, Attorney General Eric Holder announced the formation of a Financial Fraud Enforcement Task Force Working Group to focus specifically on fraud in the energy markets by monitoring oil and gas markets for potential violations of criminal or civil laws to safeguard against unlawful consumer harm. At that time, Blumenthal wrote to Holder, maintaining that “announcing such investigations and beginning to issue subpoenas could curb some of the worst speculative activity that may well be underway at this very moment.” Since then the group has released virtually no information about its investigations or conclusions, if any.

Commodity Futures Trading Commission Chairman Gary Gensler estimates that 85% of the futures contracts used by speculators to bid up the price of oil for a profit are bought by people or institutions that never use or take possession of the commodity. A recent report by Goldman Sachs indicated that excessive speculation adds 56 cents or more per gallon to the price of gas.

Blumenthal and his colleagues in the U.S. Senate plan to announce further steps to curb speculation in the coming weeks.

The full text of the letter is below:

March 18, 2012

The Honorable Eric H. Holder, Jr.
Attorney General of the United States
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001

Dear Attorney General Holder:

Just last week, the average price of a gallon of gas in my home state of Connecticut topped $4 a gallon, the fifth-highest average price in the country. The rising price of oil is putting a significant financial strain on millions of Americans. Oil prices are at their highest levels since 2008; gas prices are up an average of 12 percent in 2012, and the national average price of gasoline is now over $3.74 a gallon.

Given this situation, it is vital that the government make use of every resource available to protect Americans from price-gouging. For many consumers, the dramatic increase in price for a commodity upon which they rely is more than an inconvenience: It limits their ability to get to work, drives up prices for goods of all kinds, and threatens to hinder our nascent economic recovery.

While many factors contribute to the price of a gallon of gasoline, there is a growing consensus among energy analysts, independent observers, and businesses that operate in the oil futures market that excessive speculation is contributing significantly to these spikes in oil prices. I am very troubled by this prospect.

We must make every effort to ensure that Americans pay fair prices for gasoline and heating oil, and that the markets for these commodities operate without manipulation or fraud.

Last April, you announced the formation of a Financial Fraud Enforcement Task Force Working Group, charged with focusing on fraud in the energy markets. I believe that the recent run-up in prices in the oil futures market requires more aggressive, muscular investigation and prosecutorial action to crack down on possible widespread wrongdoing that distorts the markets and drives prices higher. By making vigorous and judicious use of your Task Force’s investigative and regulatory authorities, you can send a signal to speculators that excessive manipulation and fraud in the oil futures market will not be tolerated.

In May of last year, I wrote to you following the creation of this Task Force.  Citing the Department of Justice’s wide-ranging criminal and civil authority to investigate and prosecute fraud and price manipulation, I maintained that “announcing such investigations and beginning to issue subpoenas could curb some of the worst speculative activity that may well be underway at this very moment.” I continue to believe that is the case, and I am hopeful that a renewed focus by the Task Force will help restore some stability to a market upon which millions of Americans rely.

Thank you for your attention to this important matter. I look forward to your reply.

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