Petrol Price "rigged for a decade"

Petrol price 'rigged for a decade'


Motorists may have paid thousands of pounds too much for their petrol over
the last decade, after two of Britain’s biggest companies were raided on
suspicion of manipulating oil prices.








European investigators said the
alleged price-rigging could have had a 'huge impact' on the cost of
oil Photo:
ALAMY





By Rowena Mason and Emily
Gosden

9:57PM BST 14 May 2013

804 Comments




MPs and energy experts have raised fears motorists have been “taken for a
very expensive ride”, after officials searched the offices of BP and Shell for
evidence of price-rigging.


The companies are suspected of distorting the oil price since 2002, meaning
drivers have potentially been ripped off for more than 10 years.


Over that time, petrol prices have risen dramatically by more than 80 per
cent to around 135p per litre.


European investigators, who raided the London offices of BP and Shell, said
the alleged price-rigging could have had a “huge impact” on the cost of oil,
including the price of fuel for consumers.


The investigation into market-fixing already has echoes of the Libor scandal,
which saw the banks falsely report key interest rates used to calculate
mortgages. It cost several British banks hundreds of millions of pounds in
fines.



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Robert Halfon, the MP for Harlow who has long campaigned for an investigation
into the oil market, said high prices have been “crushing families across
Britain”.

He called for UK authorities to launch an urgent inquiry and for oil
companies to “come clean and show some responsibility for what is happening to
the international price”.

The raids were part of an investigation across the continent by the European
Commission’s competition authorities. Offices owned by Platts, a price-reporting
agency, and Statoil, a Norwegian oil company, were also raided.

European officials said several companies may have colluded in manipulating
the price of both oil and green “biofuels”.

This could have happened if the oil companies provided false information to
Platts, the main reporting agency that collects and reports prices to the wider
market.

“Any such behaviour, if established, may amount to violations of European
antitrust rules that prohibit cartels and restrictive business practices and
abuses of a dominant market position,” the European Commission said.

“Even small distortions of assessed prices may have a huge impact on the
prices of crude oil, refined oil products and biofuels purchases and sales,
potentially harming final consumers.”

It said the raids were a “preliminary step to investigate suspected
anticompetitive practices” and “does not mean that the companies are guilty of
anti-competitive behaviour nor does it prejudge the outcome of the investigation
itself”.

The inquiry comes after The Telegraph revealed growing concerns about
the reliability of oil prices last year.

A study for G20 finance ministers, including George Osborne, said traders
from banks oil companies and hedge funds have an “incentive” to distort the
market and are likely to try to report wrong prices.

Scott O’Malia, a top official at the US Commodities Futures Commission, has
also previously drawn attention to the “striking similarity” between the
potential for manipulating oil and Libor. The price reporting agencies strongly
deny any similarities between their methods and the way Libor was calculated.


The information published by Platts and other reporting agencies is used
widely by companies as a guide for pricing their oil-related products, including
petrol.

Brian Madderson, chairman of the Petrol Retailers’ Association, tonight said
any manipulation of the benchmark oil price over a decade could have cost
motorists “thousands of pounds each”.

He said the PRA has repeatedly warned the regulators that the oil price
appears to have been manipulated.

An 8p rise in the price of petrol last winter cannot be explained by basic
supply and demand, unusual geopolitical events or other factors, he said.

Like Libor – the interest rate measure that banks were found to have rigged –
the market is unregulated and relies on the honesty of the firms to submit
accurate data about all their trades.

Lord Oakeshott, a senior Liberal Democrat and former Treasury spokesman,
urged the UK authorities to take a closer look at the oil market.

“Rigging oil prices would be as serious as rigging Libor,” he said. “The
price of energy ripples right through our economy and really matters to every
business and families.

“All credit to the European Commission for taking action if they have
evidence of collusion-but why have we had to wait for Brussels to find out if
British oil giants are ripping off British consumers?

"I will be putting down parliamentary questions asking who has UK regulatory
responsibility for ensuring fair and open competition in the oil market and what
action they have taken in the past 5 years to investigate and enforce it.”

The oil companies confirmed their offices have been raided.

A spokesman for BP said the company is “cooperating fully with the
investigation and unable to comment further at this time.”

A Shell spokesman also confirmed its companies are “currently assisting the
European Commission in an enquiry into trading activities”.

“We are fully cooperating with the investigation. For legal reasons we cannot
make any further comment at this stage”.

Platts, the price-reporting agency, said the European Commission has
“undertaken a review at its premises in London” and confirmed it is “cooperating
fully”.

THEY ALL SEEM TO BE UP TO IT;BANKS,ENERGY COMPANIES,MANIPULATING PRICES ETC.
AN ALL OUT ATTACK ON THESE EVIL EMPIRES MIGHT BE IN ORDER.
COULD THIS BE A CASE FOR THE LAWYERS.

Yes Badboy if confrimed and these Companies will have to pay hefty fines like the LIBOR rigging Banks had to pay.

Cameron threat to prosecute oil bosses


Oil company executives should face criminal prosecution if they are found to
have fixed the price of petrol, David Cameron has said.








Mr Cameron is anxious to make
sure people can also face criminal charges if they are found to have rigged the
oil price Photo:
AP





By Peter Dominiczak, Rowena Mason and Steven Swinford


10:30PM BST 15 May 2013




The Prime Minister said he will urgently look at “extending criminal
offences” to cover market manipulation in the energy sector, after BP and Shell
were raided by European authorities on suspicion of rigging oil prices.



Amid fears that British motorists could have been duped into paying thousands
of pounds too much for petrol over the past decade, Mr Cameron told the
companies they will face the “full force of the law” if the accusations are
true.


However Mr Cameron’s comments also raise the prospect that companies who are
found to have manipulated household gas or electricity prices could also face
criminal prosecution.


Ministers are under pressure to take action as the investigation already has
echoes of last year’s Libor controversy, which saw banks falsely report key
interest rates.


Following that scandal the Government created new laws which made it an
offence to manipulate the benchmark mortgage interest rate. Now Mr Cameron has
said that law could be extended to cover oil prices.



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The suggestion that consumers may have been ripped off over petrol prices as
well as mortgages could be hugely damaging for the Coalition, which is keen to
demonstrate it is trying to help people with the rising cost of living.

Speaking on a trip to the US, Mr Cameron said “major consequences will
follow” if consumers have suffered as a result.

“The first thing is, these are hugely concerning allegations and if true
very, very serious,” he said. “We have to get to the bottom of what happened
first before I think we can pass judgement on the way regulators have worked in
the UK.

“It’s totally unacceptable for firms to fix prices and force consumers to pay
more. That’s why we are looking at how to extend this criminal offence to the
energy sector to make sure that those who manipulate benchmark prices feel the
full force of the law.”

It is understood the Government is looking at extending new laws created
earlier this year after major UK banks paid hundreds of millions of pounds in
fines for fixing Libor. The legislation made it clear that individuals can be
prosecuted for manipulating the key financial interest rate.

Mr Cameron is anxious to make sure people can also face criminal charges if
they are found to have rigged the oil price and driven up prices for consumers.
However, the Government is still seeking to establish whether any new laws could
be applied retrospectively.

The Prime Minister’s intervention will now pile fresh pressure on UK
authorities to launch their own investigation into the oil market and
allegations of price-fixing.

The Office of Fair Trading is facing questions after it found the petrol
market was “working well” earlier this year and saw no need for a further
inquiry.

Robert Halfon, MP for Harlow, said he has also written to the Serious Fraud
Office and City of London Police to ask whether they have any scope to
investigate.

In an urgent statement to MPs in the House of Commons, Ed Davey, the Energy
Secretary, said he is extremely worried about the allegations but warned people
not to jump to conclusions about any wrongdoing. “If it turns out to be the case
that hard-pressed motorists and consumers have been hit in the pocket by
manipulation in the market, the full force of the law should be down upon them.
There is no doubt about that.”

MPs today asked the Office of Fair Trading to explain why it gave the petrol
market a clean bill of health so recently when a European Commission
investigation is now in full swing.

The regulator was warned by a whistleblower in the oil industry that prices
are fixed on a daily basis by profiteering traders.

However, a spokesman for the OFT today said while it potentially had “serious
concerns” about the market its investigation had received “no credible evidence”
that any manipulation had taken place.

MPs from all sides of the House of Commons today urged greater investigation
of petrol prices, which have risen by 80 per cent to 135p since 2002.

Nick Clegg, the deputy Prime Minister, called on the oil companies involved
to “co-operate with a European Union institution, which is doing very good work
on behalf of British consumers”, describing the allegations as “extremely
serious”.

Others were critical of the OFT for failing to launch a full investigation
earlier this year. Russell Brown, Labour MP for Dumfries and Galloway, said the
discovery of “anything untoward” would not “shine the OFT in a very good light”.


Alan Reid, a Liberal Democrat MP for Argyll and Bute, urged the Government to
make sure drivers have not lost out.

“Now that the European authorities are investigating the oil companies, will
the Government make sure that oil companies here obey the rules?” he said.

“It’s important that the Government’s good policy on fuel duty ends up in the
pockets of the motorists not the oil companies.”

Both BP and Shell have said they are co-operating with the authorities but
cannot comment further while the European Commission inquiry is active.

Enron No Lesson to Traders as EU Probes Oil-Price Manipulation


By Ben Moshinsky, Lynn Doan & Jim Brunsden - May 20, 2013 1:01 AM GMT+0100



Enron Corp.’s 2001 collapse revealed the extent of its manipulation of spot gas prices. Twelve years later, European Union regulators may discover energy traders never learned the lessons of the scandal.
BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Platts were visited by EU inspectors last week over allegations they “colluded in a plot to manipulate the published prices of oil and biofuel products, the European Commission in Brussels said after the raids.





Enlarge image
Enron No Lesson to Traders as EU Probes Oil-Price Manipulation



Craig Hartley/Bloomberg
An Enron employee leaves the then-Enron headquarters in Houston, Texas, on Nov. 28, 2001. The Enron scandal started in 2001 as traders used trading strategies called “Fat Boy” and “Get Shorty” to create phantom congestion in the California energy markets.
An Enron employee leaves the then-Enron headquarters in Houston, Texas, on Nov. 28, 2001. The Enron scandal started in 2001 as traders used trading strategies called “Fat Boy” and “Get Shorty” to create phantom congestion in the California energy markets. Photographer: Craig Hartley/Bloomberg



Enlarge image
Enron No Lesson to Traders as EU Probes Oil-Price Manipulation



Chris Ratcliffe/Bloomberg
Shell, London-based BP and Statoil ASA, three of Europe’s biggest oil explorers, are under investigation for potential manipulation of prices in the $3.4 trillion-a-year global crude market.
Shell, London-based BP and Statoil ASA, three of Europe’s biggest oil explorers, are under investigation for potential manipulation of prices in the $3.4 trillion-a-year global crude market. Photographer: Chris Ratcliffe/Bloomberg

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Shell, London-based BP and Statoil ASA (STL), three of Europe’s biggest oil explorers, are under investigation for potential manipulation of prices in the $3.4 trillion-a-year global crude market. The involvement of McGraw Hill Financial Inc. (MHFI)’s Platts, which publishes pricing data, hearkens back to other pricing scandals including Enron, and more recently, Libor.
“We’re making exactly the same mistakes we did with Enron, just with a different commodity,” Robert McCullough, an energy consultant, said by telephone from Portland, Oregon. “The same manipulation we saw in electricity and gas pricing is what we’re seeing in oil.”
The Enron scandal started in 2001 as traders used trading strategies called “Fat Boy” and “Get Shorty” to create phantom congestion in the California energy markets. Electricity prices rose 10-fold on average and California consumers endured days of rolling blackouts.
Rapid Fire

Large-volume, rapid-fire trades between Enron and a Reliant Energy Inc. unit’s gas trader through an Enron-run electronic platform triggered price moves that all traders could see without knowing the cause, the Federal Energy Regulatory Commission found in a 2003 report. The transactions made through EnronOnline influenced daily price indexes used in physical gas contracts and for settling financial derivatives such as swaps.
Unlike spot power trades, regulators have “very little understanding” of how oil trades are reported to the trade press, and the practice lacks any real oversight, said McCullough, who after the California crisis helped regulators obtain tapes of Enron traders discussing how they drove up power prices.
Price fixing in energy markets has the potential to inflate production costs and consumer prices for everything from gasoline to airline tickets to cosmetics
Enron Parallels

Arlene McCarthy, the European Parliament lawmaker in charge of draft market abuse legislation, said she sees parallels between the energy scandals of a decade ago and the one triggered by the EU antitrust raids last week.
“We were seeing manipulation already 12 years ago and now we need to decide what we’re going to do about it,” McCarthy said in an interview in Brussels.
Statoil said May 14 the EU allegations are related to the Platts Market-On-Close assessment process, or so-called window, and may have been ongoing since 2002. An official at Stavanger, Norway-based Statoil couldn’t be immediately reached to comment further.
Kathleen Tanzy, a spokeswoman for Platts in New York, said gas markets operate very differently than they did 12 years ago and bids, offers and trades must be transparent on the company’s price assessment process.
“The oil and gas markets trade very differently and Platts tailors its rigorous methodologies to each market,” Tanzy said in an e-mailed statement. “Platts oil price assessments are fully grounded in market fact and enhancing transparency and reflecting true market value have been central to Platts editorial objectives over the past decade.”
Officials at BP and Shell said they were cooperating with EU investigators and declined to comment on Enron.
MOC Window

Platts determines daily prices in the over-the-counter energy markets in one of two ways, the first being transactions made online during prescribed times, known as the MOC window, a process in place since 1992 and used only for selected products that have industry-agreed specifications. The second method involves Platts employees discussing prices with market participants each day, many of them anonymous, and then determining the daily settlement.
As much as 80 percent of all crude and oil-product deals are linked to reference prices including those published by Platts, according to estimates by Total SA (FP), Europe’s third biggest producer.
Total’s Chief Executive Officer, Christophe De Margerie, told reporters in Paris on May 17 that he would be surprised if the EU probe turned up evidence of price fixing.
No Scandal

“Knowing the companies that are named, I would be very surprised if they contributed to manipulation of prices,” he said.
“I know Statoil and I can’t imagine that company manipulating prices,” de Margerie said. “I know their ethics. I don’t see a big scandal.”
Pannonia Ethanol, a Hungarian producer of ethanol fuel, lodged a complaint late last year with EU antitrust regulators after Platts denied it the opportunity to contribute to the price assessments.
The influence of price reporters stretches beyond oil. The assessments published by Platts and its competitors including Argus Media Ltd. and ICIS, a unit of Reed Business Information, are used to value the raw materials used in the $2.2 trillion global base-chemical industry as well as coal, power, metals, emissions, liquefied natural gas and shipping rates.
Libor Fixing

In the wake of the Libor scandal, where three banks have been fined for traders manipulating the benchmark London interbank offered rate, global regulators have been concerned that energy benchmarks could also be fixed.
The International Organization of Securities Commissions is checking if the industry has met standards designed to counter the threat of market abuse, said the group’s Secretary General David Wright. Madrid-based Iosco drew up the rules last year, saying they were needed to wipe out “vulnerabilities” that leave the door open for market abuse.
“Iosco has worked intensively on looking at oil price reporting,” Wright said in an interview in Brussels. “We are in a process of reviewing the implementation of these principles, to what degree they’ve been implemented, and to what degree they have been effective.”
Enron eventually collapsed in 2001 under the weight of an accounting scandal that used off-the-book partnerships to manipulate the Houston-based company’s share price.
The fallout of the accounting and energy trading scandals is still being sorted out a dozen years later.
An administrative law judge at the U.S. Federal Energy Regulatory Commission on Feb. 15 determined that companies including Powerex Corp. and a unit of Shell violated market rules in 2000, when California’s electricity prices reached their peak