U.S. Sen. Maria Cantwell and Rep. Jay Inslee, both from Washington state, last week called for the creation of a Department of Justice (DOJ) oil and gas market fraud task force to investigate potential fraud and manipulation in the energy market.
In letters to President Bush and U.S. Attorney General Michael Mukasey, the two Democrats proposed that DOJ's Corporate Fraud Task Force, which was set up after the Enron debacle, create a task force focused solely on fraud in the oil and gas markets.
"With record gas prices dragging our economy into a recession and $117 per barrel of oil that can't be explained by historic market forces, a new Enron-style task force should be created to examine abnormalities in the oil and gas markets," Cantwell said. "The Department of Justice stepped in to help investigate Enron's manipulation of electricity prices, now it needs to step up and investigate potential corruption in oil and gas markets," she noted.
"Congress has received testimony from our nation's attorney general, 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 fundamentals," the two lawmakers wrote in their letter to the president.
As evidence of the need for such a task force, the lawmakers cited recent federal investigations of Amaranth Advisors LLC, Marathon Oil and BP for manipulation of the petroleum and natural gas markets. In July 2007, the Federal Energy Regulatory Commission issued a show-order against now-defunct hedge fund Amaranth, several affiliates and two traders for allegedly manipulating the New York Mercantile Exchange natural gas futures contract. Amaranth, which collapsed in 2006, faces penalties of nearly half a billion dollars (see NGI, July 30, 2007).
The Commodity Futures Trading Commission (CFTC) also brought a complaint against Amaranth and a former head trader last summer, charging them with attempted manipulation of the natural gas futures market in 2006 (see NGI, July 30, 2007).
BP has agreed to pay approximately $373 million in part for conspiring to corner the market and manipulate the price of propane carried through Texas pipelines, and Marathon Oil last year agreed to pay a $1 million fine to the CFTC to settle charges that its subsidiary Marathon Petroleum Co. attempted to manipulate crude oil prices in 2003, the lawmakers said.
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