Gas-price spike sparks U.S. probe of oil traders

President Obama said a Justice Department probe will examine the role of "traders and speculators" in oil markets and how they contribute to high gasoline prices.

"The attorney general's putting together a team whose job it is to root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators," Obama said Thursday in Reno. "We are going to make sure that no one is taking advantage of American consumers for their own short-term gain."

The administration created a working group to explore whether oil and gasoline prices are being driven higher by illegal manipulation.

The group, which includes representatives of federal agencies and state attorneys general, will check for fraud, collusion or misrepresentation at the retail and wholesale level, the Justice Department said in a statement. The group also will examine investor practices and the role of speculators and index traders in oil futures markets.

Obama faces political pressure over rising gasoline prices. Crude oil futures have increased 22 percent and gasoline surged 34 percent this year as Middle East unrest reduced supply, and the global economic rebound bolstered fuel demand. Both futures contracts touched the highest levels this month since the records reached in 2008.

The average price nationwide of regular gasoline at the pump was $3.84 a gallon Wednesday, the highest since Sept. 16, 2008, AAA said on its website.

"It hurts. Every time you go to work a big chunk of your paycheck is eaten up," Obama said. "This gas issue is serious."

The president cited high gasoline prices to push energy alternatives while speaking in Reno at ElectraTherm Inc., a 45-employee company that generates energy from waste heat.

He said budget cuts proposed by Republicans would keep the nation from making "critical investments" in new technologies like those being developed by ElectraTherm, which has received more than $900,000 in federal funding.

Instead, Obama reiterated his call for an end to $4 billion in tax subsidies for oil companies. "Instead of subsidizing yesterday's energy sources, let's invest in tomorrow's," he said.

This article appeared on page D - 1 of the San Francisco Chronicle