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RENO - President Barack Obama announced a probe into oil price fraud and speculation Thursday,
US President says new Justice Department task force will root out any cases of fraud or manipulation that may have caused higher prices.
hoping to limit a rise in gasoline pump prices that has energy-hungry Americans up in arms.
Pointing the finger at "speculators," Obama said a new Justice Department task force would "root out any cases of fraud or manipulation" that may have caused higher prices.
"We are going to make sure that nobody is taking advantage of American consumers for their own short-term gain," Obama said at a town hall meeting in Reno, Nevada.
Americans have seen oil prices rise over eight percent in the last month. The average gallon now costs 35 percent more than it did a year ago.
Obama has sought to tap into unease at these rising costs -- which risk weighing down the US recovery and could dampen his 2012 reelection hopes.
"Folks are out there dealing with gas at $4 a gallon. It's just another hardship -- another burden -- at a time when things were already pretty tough," he said.
Earlier this week Obama insisted the lack of supply was not the main reason petroleum prices are rising.
"The problem," he said, "is that oil is sold on these world markets, and speculators and people make various bets, and they say, 'you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply.'"
Attorney General Eric Holder said there could be legitimate market reasons for price rises, but he promised swift action where gouging and other illegal practices are found.
Besides investigating retail prices, his group will look into commodities markets, examining the role of speculators and index traders in the oil futures markets.
But it is not the first time US lawmakers have tried to tackle oil market speculation.
Rules currently being considered by a government watchdog would place caps on the number of oil derivatives contracts any one company can control.
The rules have been bitterly opposed by big traders, including many companies that use oil contracts to hedge against risks to their business.
But there is a fierce disagreement about the impact speculation actually has on prices, with some estimating it could add as much as $20 a barrel to prices and others claiming the market price reflects real risks.
"(Oil) has been looked upon as an attractive investment for financial houses, hedge fund managers etc and that has been the primary driver of oil prices for much of 2011," said Troy Green a spokesman for the American Automobile Association.
"Even though gasoline stocks have fallen below five year averages recently, this is pretty much about money flowing into commodities."
Most market participants disagree.
Andy Lipow, a Houston-based oil analyst, said crises in the Middle East and growing demand had been the prime driver of price rises.
"The fact of the of the matter is that crude oil and petroleum products have been rising during the course of the year and got an extra boost from the turmoil that is happening in Libya, which led to a disruption in crude oil supplies," he said.
But Goldman Sachs recently turned on its peers, stating that oil prices should be around $20 a barrel lower than they are given market fundamentals.