"... the lid is finally being lifted off the dark and murky world of oil pricing" -- Luke Bosdet of the AA in Britain
Offices of both BP and Shell Oil were raided yesterday by European regulators investigating allegations of collusion between the two oil companies to rig oil prices for more than a decade. "Unannounced inspections" were also carried out at several other oil companies in London, the Netherlands and Norway.
Regulators allege the oil companies may have "... colluded in reporting distorted prices to a price reporting agency [PRA] to manipulate the published prices for a number of oil and biofuel products."
The Guardian U.K. has the story:
The commission said the alleged price collusion, which may have been going on since 2002, could have had a "huge impact" on the price of petrol at the pumps "potentially harming final consumers".
Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was "as serious as rigging Libor" – which led to banks being fined hundreds of millions of pounds.
He demanded to know why the UK authorities had not taken action earlier and said he would ask questions of the British regulator in Parliament.
"Why have we had to wait for Brussels to find out if British oil giants are ripping off British consumers?" he said. "The price of energy ripples right through our economy and really matters to every business and families."
RAC technical director David Bizley said the allegations were "worrying news for motorists" who are already suffering due to the high cost of keeping a vehicle.
"Motorists will be very interested to see what comes of these raids. Whatever happens the RAC will continue to campaign for greater transparency in the UK fuel market and for a further reduction in fuel duty to stimulate economic growth."
Four months ago the Office of Fair Trading (OFT) ruled out an investigation into petrol price fixing after finding "very limited evidence" that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops.
The European authorities declined to name any of the companies raided but BP, Shell, Norway's Statoil and Platts, the world's leading oil price reporting agency, all confirmed they are being investigated.
If these allegations are true, the negative effect on the European economy is virtually incalculable. And if they did it in Europe, I don't think it far-fetched to believe it was happening on this side of the pond as well.
Statement by Shell
"We can confirm that Shell companies are currently assisting the European commission in an inquiry into trading activities."
And likewise from BP:
"BP is one of the companies that is subject to an investigation that was announced by the European commission. We are co-operating fully with the investigation and unable to comment further at this time."
Norway's Statoil's statement:
"The authorities suspect participation by several companies, including Statoil, in anti-competitive agreements and/or concerted practices contrary to Article 53 of the European Economic Area (EEA) (PDF) [market manipulation].
"The suspected violations are related to the Platts' Market-On-Close (MOC) price assessment process, used to report prices in particular for crude oil, refined oil products and biofuels, and may have been ongoing since 2002."
According to Norway's Platts, investigators had...
"... undertaken a review at its premises in London this morning in relation to the Platts price-assessment process".
The EC said the big oil companies may have "prevented others from participating in the price assessment process, with a view to distorting published prices".
"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.
It warned: "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."
The EC conducted the raids six months after the Guardian revealed claims of a [natural] gas trading scam, resulting in investigations by the energy regulator, Ofgem and the Financial Services Authority. The investigations are ongoing.
Brussels' inquiry comes at the same time the price-reporting agencies are under scrutiny by IOSCO and told to tighten up the way they work. IOSCO is the umbrella group of financial regulators.
Last week the Guardian reported that some major energy companies, plus banks and trading houses have stopped providing information to the PRAs whose indices have underpinned the wholesale and in turn the retail gas market.
Officials at Statoil, were among those who said that they had ceased co-operating with three PRAs – Platts, Argus and Icis Heren.
Who knows where this will go from here. The EC investigation does give me a bit more hope than if the investigations were being conducted in the U.S. I lost all confidence in our own attorney general Eric Holder since his failure to prosecute the Bush regime.
For good or bad, I can't remember a more ineffective attorney general in my lifetime.
Here's the Independent's take.
And the Daily Mail Online's version