The Commodity Futures Trading Commission on Thursday said it started the probe in December and took the unusual step of publicizing it "because of today's unprecedented market conditions."
Crude prices, which on Thursday hovered around $127 a barrel, have risen more than 42 percent since early December. Gasoline prices are nearing a national average of $4 a gallon, up from about $3.20 a year ago.
The commission said details of the investigation remain confidential, but announced a handful of other initiatives designed to increase transparency of U.S. and international energy futures markets.
For example, the CFTC said it will immediately require monthly reports from institutional investors who manage funds designed to mimic the price of crude oil and other energy futures. The goal, the agency said, is to identify the amount of such index trading and to "ensure that this type of trading activity is not adversely impacting the price discovery process."
The CFTC also said it has reached an agreement with its British counterpart and InterContinental Exchange Inc.'s Futures Europe to expand surveillance of energy futures contracts with U.S. delivery points, including the benchmark West Texas Intermediate crude, which trades on the New York Mercantile Exchange.
"The implementation of today's measures will improve oversight of the energy futures markets to ensure they reflect fundamental economic forces of supply and demand, free of manipulation and fraud," the CFTC said in a statement.
U.S. Sen. Jeff Bingaman, chairman of Senate Energy and Natural Resources Committee, earlier this week asked the CFTC to provide the committee with more information about its oversight of energy commodity markets.
The New Mexico Democrat said he was concerned about increasing trading activity in U.S. crude oil taking place overseas and in over-the-counter markets. He also questioned the CFTC practice of classifying so-called "swap dealers," including large investment banks, as "commercial" market participants alongside traditional buyers and sellers, such as oil companies and airlines.
"The practice of including investment banks in the commercial participant category calls into question the CFTC's continued assertion that noncommercial participants, or speculators, follow rather than lead oil price movements," Bingaman wrote in a letter Tuesday.
Congress earlier this month voted to give the CFTC greater oversight of unregulated electronic exchanges, such as ICE, as a way to protect consumers and deter price distortion and manipulation.
A Senate subcommittee investigation last year found that hedge fund Amaranth Advisors LLC, which collapsed in 2006 after losing more than $6 billion in natural-gas trades, had shifted its activities to ICE from the regulated Nymex to avoid trading limits, and that the "excessive speculation" raised homeowners' heating bills.
Speculation has been cited as one on many factors contributing to surging petroleum prices, along with assumptions about new supplies, limited demand growth, possible supply disruptions overseas and the dollar's depressed value against other currencies.