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Klobuchar Calls for Department of Justice Oil and Gas Market Fraud Task Force

With family budgets squeezed by skyrocketing gas prices, Klobuchar demands action to help middle class Americans

April 24, 2008

Washington, D.C. – With gas prices at an all-time high of $3.51 per gallon, today U.S. Senator Amy Klobuchar called for the creation of a Department of Justice Oil and Gas Market Fraud Task Force to look into skyrocketing energy prices in the oil and gas sector.  Klobuchar wrote U.S. Attorney General Michael Mukasey urging him to immediately create the task force, as part of the President’s Corporate Fraud Task Force, as one step in helping middle class families cope with the drastic increase in energy prices.

“With oil soaring well over $100 a barrel and oil companies raking in record profits by drilling into middle class pocketbooks, it’s time American families had someone to look into what is going on,” said Klobuchar.  “Gas prices are at an all-time record, and the onset of “Lake Season’ in Minnesota is near, so we must look for every possible opportunity to help our families save their hard-earned money in these difficult economic times.”

Klobuchar said it is no longer sufficient to say that high energy prices are simply the result of supply and demand.  Energy market experts and states’ attorneys general have testified before Congress that the current high price of oil and gas cannot be explained by market forces.

Earlier this month, an executive from Exxon Mobil testified under oath that the price of oil should be $50 to $55 per barrel based on supply and demand fundamentals.   In October 2007 the CEO of Marathon Oil, Clarence Cazalot Jr. said, "$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this."
 
Klobuchar has joined Senator Maria Cantwell (D-WA) in proposing that the task force be part of the Corporate Fraud Task Force at the Department of Justice, which was established after the collapse of Enron and other revelations of corporate scandal.  Since its establishment, the task force has produced more than a thousand convictions by aggressively prosecuting corporate fraud under existing laws. Creating this new division to oversee the oil and gas sector would help protect consumers from price gouging by oil companies.

The full text of the letter is below:

The Honorable Michael Mukasey
Attorney General
Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
 
Dear Mr. Attorney General:

    I write to urge you to establish a new Oil and Gas Market Fraud Task Force under the Department of Justice to protect Americans from price gouging and market manipulation.

    The affordability of energy is central to the economic health of our country, and the prosperity of our families and businesses.  Their already tight budgets are being further squeezed by the skyrocketing cost of oil and natural gas – prices have tripled since 2002.  In my state of Minnesota, farmers are paying record-high prices for fertilizer and fuel.  The timber and chemical industries are suffering from the rising cost of natural gas.  And families are being forced to make increasingly difficult budget choices – for example, between filling prescriptions and heating their homes.  These are choices no family should have to make.

    It is no longer sufficient to say that high energy prices are simply the result of supply and demand.  Energy market experts and state attorneys general alike have testified before Congress that the current high price of oil and gas cannot be explained by market forces.  A major oil company executive has testified that the price of crude oil should be approximately $50 to $55 given market fundamentals, but the current price is more than double that amount.

    Following the collapse of Enron and other revelations of corporate scandal, a Corporate Fraud Task Force was established at the Department of Justice.  The Task Force has since produced more than a thousand convictions by aggressively prosecuting corporate fraud under existing laws.  Creating a new division of the Corporate Fraud Task Force, with the specific mission of overseeing energy markets, would allow us to apply its considerable resources to protecting consumers from oil and gas price gouging.

    Oil companies have been quick to dismiss the possibility that market manipulation is taking place.  However, when Congress directed the Federal Trade Commission to investigate the price increases following Hurricane Katrina, the FTC found 15 instances of price gouging.

    The cost of energy affects Americans from all walks of life and businesses in every sector of our economy.  The federal government has a critical role to play in conducting aggressive oversight of changing energy markets.  History has shown us that when enforcement is lax, consumers ultimately pay the price.  I am therefore proud to join my colleague Senator Cantwell in urging you to create the Oil and Gas Market Fraud Task Force to put an end to market manipulation and fraud in energy markets.

                Sincerely,

                Amy Klobuchar
                United States Senator

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