Senate Republicans thwarted Democratic-supported legislation that would increase windfall- profit taxes on oil companies such as Exxon Mobil Corp. as Democrats set their sights on tighter energy trading scrutiny.

Democrats fell nine votes shy today of 60 needed to proceed to debate. The White House Office of Management and Budget today threatened a veto of the measure.

The proposal, announced last month, would have imposed a windfall profit tax of $10 billion to $12 billion this year on oil companies, according to Senate Democrats. It also included new margin requirements on oil-futures trades, and aimed to outlaw price gouging as energy prices have soared to records.

Energy-related legislation is "going to be an issue we hear about the rest of this spring, all summer and into next fall,'' said New York Democratic Senator Charles Schumer, a main advocate of the windfall profit tax.

Following the bill's defeat, Democrats said they may work on separate legislation to increase oversight of trading by the Commodity Futures Trading Commission. Schumer said that parts of the windfall tax bill including commission provisions could be split into separate proposals.

An effort to tighten commission regulation is increasing among Democrats and some Republicans along with record oil and gasoline prices. Oil reached a record $139.12 per barrel June 6. Pump prices in the U.S. passed $4 a gallon for the first time over the weekend. Regular gasoline nationwide averaged a record $4.039 a gallon, the Energy Department said yesterday.

`Furious' Over Prices

"The American people are furious about what's going on and they understand that nothing is happening here that justifies the price,'' said Senator Byron Dorgan, a North Dakota Democrat.

Dorgan and other lawmakers have blamed investment banks, speculators, and hedge funds for buying commodities and driving up the prices. More scrutiny of their trades and stiffer margin limits could bring the price of oil down by 30 percent, Dorgan said at a press conference today.

Democrats hope to raise margin requirements on oil futures traders and extend federal scrutiny to all trades made in the U.S., including on foreign exchanges. They want to reclassify certain traders, such as investment banks, so that their trades can be more closely monitored.

"We are going to keep trying it, there are a number of approaches to take,'' said Senator Carl Levin, a Michigan Democrat.

ICE Regulation

Congress could regulate U.S.-based transactions on the Intercontinental Exchange in London, which does not limit speculation, Levin said. Lawmakers also are considering imposing rules on the London exchange's American parent Intercontinental Exchange Inc., which is based in Atlanta.

"If we can legally do it I'm all for it,'' he said of imposing rules on the Atlanta company known as ICE. "If we can't, at least where the orders are placed on terminals in the United States, we ought to be able to control the manipulation and the speculation that takes place on that exchange.''

Republicans main objection to the Democratic bill was the windfall tax provision.

"The bill before us is pure and simple, a pathetic attempt to even call itself an energy plan,'' Texas Republican Senator Kay Bailey Hutchison said on the Senate floor. A windfall profit tax passed in 1980 was "an abject failure.''

`Undercut' Energy Security

The bill "will undercut U.S. energy security and decrease U.S. energy production, thus exacerbating market tightness and increasing energy prices,'' said the White House in a statement threatening veto of the measure.

Senate Republicans today also blocked debate on a tax measure to extend credits for wind, solar and other forms of renewable energy. Republicans objected to that legislation, which was 10 votes shy of the required 60, partly because of concern over the source of funding for the tax breaks.

"We need to get beyond the posturing here, and get on with the job of extending these tax provisions,'' said Senator Jeff Bingaman, a New Mexico Democrat.

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net