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Is Obama's Oil Manipulation Crusade for Real?

The Big Oil companies have benefited from the recent run up in oil prices, as have the oil refiners, and Big Oil is often enough the easy target of the government when its profits balloon on high prices at the pump. Indeed, Big Oil company persona non grata in the U.S., BP (BP - Get Report), is expected to report a big profit in the first quarter on Wednesday, of roughly $5.5 billion, while Gulf of Mexico residents and businesses still complain about the claims payment process one year after the oil spill.

BP kicks off earning for Big Oil this week, but all the major U.S. oil companies follow in a matter of days and are expected to be flush with first quarter cash thanks to the high oil prices. Chevron (CVX - Get Report) said in its interim first quarter report that high oil prices will buoy earnings. Chevron reports on April 29.

Big Oil is a target of the federal government regardless of the debate over speculation. President Obama was pressing congressional leaders this week to cut out tax breaks for oil and gas companies. In a letter released by the White House, Obama wrote of the issues in the energy markets and the difficulty in trying to lower gas prices this way, "One of those steps is to eliminate unwarranted tax breaks to the oil and gas industry and invest that revenue into clean energy to reduce our dependence on foreign oil."

House Leader and Ohio Republican John Boehner, told ABC News on Monday that tax breaks for the oil and gas companies deserve a look, and noted that, "Everybody wants to, to go after the oil companies. And, frankly, they've got some part of this to blame."

Inventory levels of crude at the U.S. Cushing, Oklahoma stockpile remain at historically high levels, and energy market experts pound the table with the fact that there is no fundamental shortage of oil. Following the conventional wisdom of a Middle East risk premium, Exxon Mobil (XOM - Get Report) CEO Rex Tillerson has said on CNBC that the high oil prices are about where the next disruption in the Middle East occurs, causing the next barrel of oil to be taken offline. It's not the 1.6 million barrels already taking offline in Libya that keeps oil prices tilted to the upside. It's the "Libya + 1" scenario at work.

Meanwhile, oil refiners CVR Energy (CVI - Get Report) and Western Refining (WNR - Get Report) are up 70% and 50% year-to-date, respectively.

Still, the law professor and frequent commenter on commodities trading, Michael Greenberger, said it's not about Big Oil or the refiners, and added with confidence, "If Justice appears to be using their subpoena power then oil prices will drop. Traders will run scared. These guys don't want to end up in jail. It wouldn't take long to uncover and it would be a great mistake if Justice didn't take it seriously and put their shoulder to the wheel."
State Your Opinion on Obama's Oil Price Crusade
Obama's Oil Price Crusade: Merely Lip Service?

Of course, for the U.S. public, it's déjà vu all over again with $4 gasoline in 2008 and now in 2011 -- and in the intervening years, the political will has not existed to even get traction on the position limit issue. Greenberger bets that when the financial crash sent oil from $140 to $35 overnight it made it easier for the public to think that gasoline prices would remain manageable without regulatory fixes. "I don't think that will happen a second time, and that's why criminal investigations are needed."
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