FTC Begins Oil-Trade Investigation
FTC Chairman Jon Leibowitz explained the regulation group will use "compulsary process," allowing the Commission to require people to disclose information. (image: huffingtonpost.com)
The Federal Trade Commission has begun investigating oil traders, producers and refiners to determine whether they’ve been engaging in anti-competitive practices or manipulation, or giving federal agencies misleading data about the price of crude oil, the Wall Street Journal reported this week.
“Let me assure you that the commission will conduct this investigation as efficiently and effectively as possible,” FTC Chairman Jon Leibowitz announced in a letter to Senator Maria Cantwell, a longtime proponent of stricter regulation scrutiny for the energy markets.
The probe was inspired in part because refining profit margins of U.S. operations saw huge increases between the beginning of this year and May. This raised some eyebrows since refiners were only functioning at 81.7% capacity, a 7% decrease from the same time period in 2010. The Commission plans to review exactly how refinery operators decided to shut down some equipment for maintenance, since lagging output can push gas prices higher.
Several Democratic U.S. senators, including Harry Reid (Nevada), Patty Murray (Washington), Dick Durbin (Illinois), Claire McCaskill (Missouri), and Chuck Schumer, (New York) also called for the investigation.
“In the last six months, the refiners’ profits have skyrocketed. They were 42¢ in January; they were 64¢ in April; 80¢ a few weeks ago in May. There is not a good free market explanation for that,” Schumer commented. “There are clear signs that refiners may be stockpiling oil, which keeps prices high. I urge the FTC to immediately investigate and ensure that New Yorkers are not being victimized by this type of manipulation.”
The probe coincides with the work of the Obama administration’s task force, created in April in an attempt to reign in prices by identifying and eliminating illegal conduct within the oil and gas markets.
“We remain committed to preventing and prosecuting any anticompetitive, fraudulent, or otherwise illegal activity which we identify through the foregoing investigation,” Leibowitz wrote in another recent letter to Senator John Rockefeller, who requested an investigation in March.
Stay tuned for developments as the probe unfolds.
