FTC Heeds Blumenthal’s Call to Launch Comprehensive Investigation into Oil Speculation, Potential Criminal Activity in Energy Market

(Washington, DC) – Senator Richard Blumenthal (D-CT) issued the following statement today after Federal Trade Commission (FTC) Chairman Jon Leibowitz informed him that he was launching an investigation – including authorizing the use of compulsory process – to determine whether various actors in energy markets have engaged in market manipulation or other activities that have lessened competition to increase oil and petroleum prices disproportionately, resulting in skyrocketing gas prices for families and businesses in Connecticut and across the country:

“Federal officials are finally recognizing that where there’s smoke, there may be fire – and now they’ll investigate to find out. I am greatly encouraged that the FTC has heeded my call for a thorough investigation, including the use of compulsory process, to uncover and root out potential criminal activity of bad actors in our energy markets. Families and businesses in Connecticut and across the country have borne the brunt of skyrocketing gas prices, and the investigation must be aggressive and hard-hitting, a crucial first step in leveling the playing field, ensuring fairness in the marketplace, and helping those struggling to make ends meet as our economy continues to recover.”

Blumenthal has repeatedly called for a comprehensive federal investigation into potential illegal criminal activity in the energy markets, citing the necessity of the use of compulsory process, including subpoenas, to aid in fact-finding.

Specifically, the FTC announced that it is launching an investigation “to determine whether certain oil producers, refiners, transporters, marketers, physical or financial traders, or others have engaged or are engaging in practices that have lessened or may lessen competition – or have engaged or are engaging in manipulation – in the production, refining, transportation, distribution, or wholesale supply of crude oil or petroleum products; or have provided false or misleading information related to the wholesale price of crude oil or petroleum products to a federal department or agency.”

The full text of the letter follows: 

June 20, 2011

The Honorable Richard Blumenthal
United States Senate
Washington, D.C. 20510

Dear Senator Blumenthal:

Thank you for your recent correspondence to the Federal Trade Commission concerning the petroleum industry. As you know, crude oil and refined petroleum product prices and profit margins increased substantially earlier this year. The Energy Information Administration reported that as of early May, U.S. refiners’ refining margins had increased more than 90 percent since the beginning of 2011, and U.S. refiners at that time were using only 81.7 percent of their capacity, representing a seven percent reduction from the same period in 2010. In light of these and other developments, the Commission has opened an investigation and has authorized the use of compulsory process to determine whether certain oil producers, refiners, transporters, marketers, physical or financial traders, or others (1) have engaged or are engaging in practices that have lessened or may lessen competition – or have engaged or are engaging in manipulation – in the production, refining, transportation, distribution, or wholesale supply of crude oil or petroleum products; or (2) have provided false or misleading information related to the wholesale price of crude oil or petroleum products to a federal department or agency. The Commission seeks to determine through this investigation whether there is a reason to believe that the foregoing practices are in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, as amended; the Commission’s Prohibition of Energy Market Manipulation Rule, 16 C.F.R. Part 317; or Section 811 of Section 812 of the Energy Independence and Security Act of 2007, 42 U.S.C. §§ 17301, 17302.

The information to be secured through this investigation may include, but is not limited to, utilization and maintenance decisions, inventory holding decisions, product supply decisions, product import and export strategies and volumes, product output decisions, capital planning decisions, product margins and profitability, and any other information which may be relevant to determining whether there is a reason to believe that there have been violations of any of the forgoing statutes or of the Rule.  Let me assure you that the Commission will conduct this investigation as efficiently and effectively as possible. 

We recognize that 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 anticompetitive, fraudulent, or otherwise illegal activity which we identify through the foregoing investigation. The Commission will also continue to assist the Oil and Gas Price Fraud Working Group, established by the Attorney General and composed of state and federal law enforcement agencies, to help identify civil or criminal violations in the oil and gasoline markets, and to ensure that American consumers are not harmed by any unlawful conduct.  The Commission appreciates and shares your long-standing interest in finding ways to protect consumers in the petroleum sector.  If you have additional questions, please do not hesitate to contact Jeanne Bumpus, the Director of our Office of Congressional Relations, at xxx-xxx-xxxx.

Sincerely,

  Jon Leibowitz

  Chairman

 

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