WASHINGTON, D.C. -- The soaring costs of gasoline, home heating oil, and diesel are creating tremendous hardships for American families, truckers, and small businesses. To fully explore all causes of the rapidly increasing prices, U.S. Senator Susan Collins joined with a bipartisan group of senators requesting the President establish a task force to investigate corruption and manipulation in the energy markets.
"In Maine the average family uses between 800 and 1,000 gallons of oil during the winter," said Senator Collins. "If there is corruption or manipulation driving up the costs these families will have to pay, we should use every available to resource to investigate and punish any wrongdoers. High energy prices continue to hurt our families and business and are a direct threat to our national and economic security, so I believe we should gather all possible information about the potential contributions to this crisis."
The text of the letter the group of Senators sent to President Bush follows:
The President
The White House
Washington, DC 20500
Dear Mr. President:
With Americans questioning the fairness of record high oil and gas prices, we urge you to establish a new interagency Oil and Gas Market Fraud Task Force under the leadership of the Department of Justice to ensure that energy markets are free from illegal market manipulation or corporate corruption.
Oil and gas are irreplaceable commodities central to our economic prosperity, national security, and the health and well being of our citizens. Prices for these necessities however have more than tripled since 2002 - families, businesses, and hard working Americans are struggling to make ends meet with ever shrinking disposable incomes. Airlines are going bankrupt and truckers are barely getting paid enough to cover diesel prices that exceed $4 dollar per gallon. Families have cut back on going out to dinner or the mall, further exacerbating our economic downturn.
Congress has received testimony from energy market experts and major oil company executives that the price of oil and gas can no longer be explained or predicted by normal market dynamics or their historic understanding of supply and demand forces. An executive from Exxon Mobil recently testified before Congress under oath that the price of crude oil should be about $50 to $55 per barrel based on the supply and demand fundamentals he had observed. Yet current crude oil prices are more than double that amount and crude oil futures remain well above $100 per barrel through 2016.
In the wake of the Enron and other corporate scandals, you initiated the Corporate Fraud Task Force at the Department of Justice as part of your Corporate Responsibility Initiative. By aggressively enforcing existing laws and regulations, the Task Force’s actions have yielded over 1,200 corporate fraud convictions to date. In addition, the Justice Department has obtained more than one billion dollars in fraud-related forfeitures and has distributed that money to the victims of corporate fraud. We believe the Corporate Fraud Task Force should establish a new Oil and Gas Market Fraud Task Force and apply its considerable resources, initiative, and ability to coordinate federal agency efforts to help restore consumer confidence that energy prices are fair. We also urge you to add the Federal Trade Commission, which received new authority in the Energy Independence and Security Act of 2007 to prevent manipulation in the wholesale oil and petroleum distillate markets, to the interagency Task Force.
The threat of oil and gas market manipulation remains real. For example, last July, Marathon Oil Corporation agreed to pay a $1 million fine to the Commodities Futures Trading Commission to settle charges that its Marathon Petroleum Company subsidiary attempted to manipulate crude oil prices. Similarly, in the summer of 2006, a manipulative scheme to game the natural gas market by the now defunct hedge fund Amaranth cost consumers upwards of $9 billion. And a federal investigation led British Petroleum to pay approximately $373 million in part for conspiring to corner the market and manipulate the price of propane carried through Texas pipelines.
As we learned from the 2000-2001 Western electricity crisis, rising energy costs hurt virtually every sector of our economy and drive inflation and losses in consumer confidence. That electricity crisis took a serious toll on American consumers and businesses, forcing a 1.5 percent decline in productivity which caused 589,000 Americans to lose their jobs and a $35 billion drop in domestic economic product.
How the federal government responds to the changing dynamics of energy markets is vital to our continued national and economic security. If the Western energy crisis taught us anything it is that consumers are best protected when energy markets are subject to aggressive oversight and enforcement. And unless there is a cop on the beat vigilantly policing energy markets - especially when supplies are tight in markets with extremely inelastic demand - sophisticated companies can fleece consumer pocketbooks without fear of penalty. We look forward to working with you to establish an Oil and Gas Market Task Force to root out fraud and manipulation in all corners of the oil and gas marketplace, and restore consumer confidence.
