Oil Companies, Refiners Investigated For Possible Market Manipulation
This would help to explain those high gas prices.
Late Monday, federal regulators announced an investigation into whether oil companies and refiners have manipulated markets, raising oil prices to their benefit, according to a letter released by the Federal Trade Commission to the Senate yesterday and cited by The Hill.
The Federal Trade Commission plans to investigate why some oil refineries were shut down for maintenance, which can lead to higher oil prices, according to The Wall Street Journal. It is also investigating whether refiners engaged in other anti-competitive practices or provided misleading information to federal officials, the FTC letter said.
The FTC has authorized the use of compulsory process to demand records from oil refineries, according to McClatchy Newspapers. Under law, the FTC can impose penalties on companies that manipulate the price of oil, The Washington Post reported yesterday.
The news comes at a time of great prosperity for oil refiners. Profit margins of U.S. refiners have nearly doubled since the beginning of 2011, even though refiners have been using only 81.7 percent of their capacity: a seven percent reduction from the same period in 2010, according to yesterday's FTC letter.
Market manipulation, if real, would be making a bad situation only worse for consumers. U.S. oil prices have risen to nearly $115 per barrel this year, according to The Wall Street Journal. That's a 47 percent increase from oil prices last year, as the oil price in June of last year hovered around $78 per barrel, according to CNN.
Democratic senators praised the FTC move. “The investigation must be aggressive and hard-hitting,” said Sen. Richard Blumenthal (D-Conn.), who has called for a federal investigation into potentially illegal activity in the energy markets by oil companies and traders. “Federal officials are finally recognizing that where there’s smoke, there may be fire.”
Sen. Jay Rockefeller (D-W.Va), who had urged the FTC to probe the issue in March, said in a statement, "I am not convinced that these price increases were necessary or reflected true market conditions. And the high profits in the oil industry only increase my concerns that West Virginians are paying more at the pump while the big companies are getting richer.”
Oil companies, in their own defense, say they themselves are not the culprits. Oil traders and analysts have blamed the weak economy and greater ethanol use for lower demand for oil and, consequently, less production, Reuters reported on Monday.
Meanwhile, the London Metal Exchange recently announced an investigation into whether Goldman Sachs manipulated the metals market, after firms, including Coca-Cola, accused Goldman of purposefully limiting the amount of metals it released to its customers in order to raise metal prices.
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The Huffington Post Bonnie Kavoussi First Posted: 06/21/11 12:24 PM ET Updated: 08/21/11 06:12 AM ET