Feds Open Probe Of Oil Price Rise

The Federal Trade Commission (FTC), using new powers granted under last year's financial regulatory reform legislation, has opened a probe of the dramatic rise in oil prices over the last eight months.

In a letter to Sen. Jay Rockefeller (D-WVA), FTC Chairman Jon Leibowitz said the agency would look not just at commodities trading in oil, but also refinery operations. Leibowitz cited data from the U.S. Energy Information Administration showing that refinery margins have risen dramatically, along with gas prices.

The data shows that, as of early May, refinery margins have increased 90 percent since the start of the year. At the same time, U.S. refineries were using less capacity. During that time, Leibowitz says, refiners were using less than 82 percent of their capacity to produce gasoline, down seven percent from the same period a year ago.

“In light of these and other developments, the Commission has opened an investigation, and authorized the use of a compulsory process to determine whether certain oil producers, refiners, transporters, marketers, physical or financial traders, have engaged or are engaging in manipulation,” Leibowitz wrote.

He also said the probe will seek to determine whether any of these entities have provided false or misleading information to the U.S. Department of Energy.

Strain on consumers

“We recognize that the recent increases in crude oil and petroleum product prices place a tremendous strain on individual American consumers and harm the economy as a whole, and we remain committed to preventing and prosecuting any anti-competitive, fraudulent, or otherwise illegal activity which we identify,” Leibowitz concluded.

Oil prices began rising last October, at a time of year they usually start to decline. The increase accelerated at the beginning of the year when political turmoil broke out in the Middle East, disrupting the flow of oil from Libya.

Oil prices peaked in late April and have been slowly falling ever since. The decline picked up speed today when the U.S. and several other nations announced coordinated release of oil from their strategic petroleum reserves. The release had the effect of flooding the market with oil, pushing the price of West Texas Crude to around $90 a barrel in New York.

As oil prices have declined in the last six weeks, so have gasoline prices. Today, the national average price of self-serve regular is around $3.61 a gallon, according to AAA. That's down 37 cents from the May 5 high.