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Guest Post: European Commission Investigates Oil Majors For Oil Price Manipulation

Tyler Durden's picture




 

Submitted by Joao Peixe via OilPrice.com,

After the Libor rigging scandal in 2012, authorities have sharpened their act, deeply scrutinizing company financial records, and implementing stricter regulations. This has led to a new investigation which has led European authorities to raid the offices of Shell, BP, and Statoil, in what is suspected to be one of the largest international actions since Libor.

The European Commission admitted that it carried out surprise raids on the offices, two in EU member states, and one in a non-EU country, as part of an investigation into the oil majors over allegations of anti-competitive agreements, which led to oil price manipulation.

The Commission stated that “officials carried out unannounced inspections at the premises of several companies active in and providing services to the crude oil, refined oil products and biofuels sectors.

The Commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products.”

Statoil has claimed that the entire misunderstanding is related to the Platts price assessment process. Each day during a half-hour period known as the Platts window, the oil pricing agency determines the cash prices by analysing bids, offers, and trades. The system has taken criticism before, through claims that the half hour only gives a very small snapshot of the market, and that the exclusion of trades outside of the time period make the system vulnerable to manipulation.

Platts, Statoil, Shell, and BP have agreed to cooperate with the investigation.

More from The FT (explaining the price-setting mechanism)...

 

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Wed, 05/15/2013 - 22:38 | 3567699 Neethgie
Neethgie's picture

The eu commission are commies seriously raiding the office of a non member state company? On what grounds, they are actively destroying sovereign Europe state by state, what bp are accused of could be settled by its own regulators

Wed, 05/15/2013 - 23:07 | 3567774 Silver Bug
Silver Bug's picture

Every major market is currently being manipulated to some degree. They will eventually lose their control over this manipulation.

 

http://jamesturkblog.blogspot.ca/

Wed, 05/15/2013 - 23:12 | 3567785 Xibalba
Xibalba's picture

not before people are shot in the streets

Wed, 05/15/2013 - 23:34 | 3567815 ZerOhead
ZerOhead's picture

They will probably have to settle with a small fine and no admission of guilt... these oil guys are known to be some very slippery dudes.

Oil-pricing agency Platts is also under investigation. Platts, a unit of McGraw Hill Financial Inc., is the custodian of the Brent crude contract, the de facto world benchmark for oil prices and base for the hundreds of billions of dollars of futures contracts that trade off it. Crude oil prices in turn influence the price of gasoline and other fuels.

Wed, 05/15/2013 - 23:38 | 3567829 SafelyGraze
SafelyGraze's picture

ot: "the sound of money being made"

http://www.youtube.com/watch?v=VTLSLR0-YuU&t=670s

spoiler: boom boom boom boom boom boom boobooboom boom

frankly, it's a lot simpler (and safer!) to just print the stuff.

or to electronically generate it.

Mine Bitcoins, Not Metals!

Thu, 05/16/2013 - 00:26 | 3567932 Harlequin001
Harlequin001's picture

'The Commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for'...

Not like the Fed and the BoE then. Wouldn't want them to get done for fixing prices would we...

Thank god for regulators eh...

Thu, 05/16/2013 - 00:59 | 3567973 Urban Redneck
Urban Redneck's picture

Haven't they (or someone else) been digging into Platts reporting mechanism for ages now? 

Thu, 05/16/2013 - 03:57 | 3568084 Zodiac
Zodiac's picture

Platts is a unit of McGraw-Hill, and so is another information service provider with the same business model and ethics that you can get anything, it's just a matter of how much you pay us for it; that other unit is rating agency S&P.

Wed, 05/15/2013 - 23:50 | 3567860 LetThemEatRand
LetThemEatRand's picture

"The eu commission are commies seriously raiding the office of a non member state company? On what grounds"

Oligarchs fighting each other.  On what grounds do the oil majors extract tax dollars to continue their monopoly of energy via international occupation of oil rich countries?  I don't care if the snake wins or the alligator wins.  Fuck them both.

Thu, 05/16/2013 - 02:58 | 3568051 thisandthat
thisandthat's picture

Terrible, and the worst is they did it unannounced - unbelievable! What's this world coming to...

Thu, 05/16/2013 - 06:43 | 3568170 Go Tribe
Go Tribe's picture

Oil manipulation????

What about the stock market?

Wed, 05/15/2013 - 22:40 | 3567706 sitenine
sitenine's picture

Investigation: The act of officially destroying a company or individual that isn't 'playing along'.

Thu, 05/16/2013 - 03:07 | 3568057 thisandthat
thisandthat's picture

I know, right? Just imagine - someone investigating the Fed, COMEX, MF Global, GS, JPM, etc., etc... unthinkable - on what grounds, exactly? Commies, all commies, I say - that's all they are...

Wed, 05/15/2013 - 22:40 | 3567708 ekm
ekm's picture

Do you want me to repeat for the Nth time that price of oil has been liborized it's been 13 years?

 

Normal price is $40-50. Liborized prices is the one now

Thu, 05/16/2013 - 03:08 | 3568058 thisandthat
thisandthat's picture

You communist!

Wed, 05/15/2013 - 22:47 | 3567723 Spitzer
Spitzer's picture

I worked for Stat Oil in Canada those fuckers. They got charged for diverting water in Alberta. (not that I cared that they did that)

 

They are not happy unless they are spending money. They spend like money is nothing. We were told money is not an issue ever.

Wed, 05/15/2013 - 22:49 | 3567729 ekm
ekm's picture

Tell us about their "costs".

Is it $70/barrel? Really? 

 

How about $30.

Wed, 05/15/2013 - 22:58 | 3567747 Spitzer
Spitzer's picture

I don't know. The way they do business just never made sense to me.

Wed, 05/15/2013 - 23:05 | 3567767 otto skorzeny
otto skorzeny's picture

My fav story today on CNBC was the Saudis should be concerned about "US energy independence"- give me a fucking break.

Wed, 05/15/2013 - 23:08 | 3567777 ekm
ekm's picture

US produces 7.5million b/d and consumes 19 million b/day

 

CNBC is the Pravda of finance.

Wed, 05/15/2013 - 23:26 | 3567808 otto skorzeny
otto skorzeny's picture

The only thing CNBC is independent from is reality.

Wed, 05/15/2013 - 23:53 | 3567870 LetThemEatRand
LetThemEatRand's picture

They are independent from those who don't like oligarchs.  CNBC is owned by GE, one of the biggest crony capitalists in the world.  Status quo is the rule when the status quo allows you to rule.

Thu, 05/16/2013 - 00:00 | 3567885 ekm
ekm's picture

GE is practically a state owned enterprise, not different from chinese SOEs.

Thu, 05/16/2013 - 00:06 | 3567900 LetThemEatRand
LetThemEatRand's picture

The state is practically a GE owned enterprise.  Except for the practically part.

Thu, 05/16/2013 - 00:01 | 3567889 greyghost
greyghost's picture

once the well has paid for itself....what is cost of oil?????

Thu, 05/16/2013 - 00:46 | 3567964 CrashisOptimistic
CrashisOptimistic's picture

The operating costs, but wells drilled now decline in output so rapidly from their initial days that those operating costs can exceed revenue and get the well plugged faster than you would think.

So what is the cost of oil if you have to pay $500,000 to pour concrete into a hole 2 miles long and get no oil out to pay for that expense?

Wed, 05/15/2013 - 22:49 | 3567732 JustObserving
JustObserving's picture

While you are at it, please take a look at gold and silver price manipulation.

Wed, 05/15/2013 - 22:53 | 3567740 Fuku Ben
Fuku Ben's picture

This will be killed faster than the JPM Silver price fixing investigation

Thu, 05/16/2013 - 02:23 | 3568027 Harlequin001
Harlequin001's picture

I thought that one was pretty quick wasn't it? It only took them what, 4 years, or was it 5...

and still found nothing...

Thu, 05/16/2013 - 06:32 | 3568159 LeisureSmith
LeisureSmith's picture

Maybe this is just them taking one for the team, picking up the tab for some project. Funding disguised as a large fine? Whatever this is about, stories will get straightened out at the annual confab next month in England. 

Wed, 05/15/2013 - 23:01 | 3567754 MrBoompi
MrBoompi's picture

Oil companies manipulating the prices of products sold to consumers? Now that's a shocker!

Thu, 05/16/2013 - 10:31 | 3568934 The_Alchemist
The_Alchemist's picture

There's an even more significant fact that deepens this great energy scandal.
The big three "fosil fuels" are obsolete!
http://www.youtube.com/watch?v=8TAmiUnBTyI
Replication 1: http://www.youtube.com/watch?v=-WsKOdxLIJU

Replication 2: http://www.youtube.com/watch?v=4nnvley2N4g

Wed, 05/15/2013 - 23:03 | 3567757 knukles
knukles's picture

Is the price fixed, is there collusion and manipulation?
Tell me something that the price is not fixed, set, subsidized, floored, controlled, managed, regulated or fucked with in some way.

Even the prediden'z net worth is fixed.

 

Oh, and has absolutely nothing to do with government regulation and oversight, either, does it?

Wed, 05/15/2013 - 23:10 | 3567781 John Sixpack
John Sixpack's picture

Jus make sho my ebt card and my obumma phone is fixed

Wed, 05/15/2013 - 23:10 | 3567783 Westcoastliberal
Westcoastliberal's picture

The price should be no higher than $35 BBL resulting in gasoline at about $1.85 a gallon.  We've been getting brutally fucked since "W". As I recall when he took office gas was about $1.65.

Wed, 05/15/2013 - 23:23 | 3567802 tmosley
tmosley's picture

How does I understood inflations?

Thu, 05/16/2013 - 02:25 | 3568029 Harlequin001
Harlequin001's picture

We've printed a lot of new money since then....

Wed, 05/15/2013 - 23:16 | 3567792 pragmatic hobo
pragmatic hobo's picture

uhm, gee ... shocked, I tell you, shocked.

Thu, 05/16/2013 - 08:35 | 3567809 Downtoolong
Downtoolong's picture

They're talking about the physical market equivalent of what the big banks do every day in the oil futures markets.

The greatest abuses are in the relatively illiquid products and delivery locations. A few outlier trades can radically move the Platts high/low range and midpoint which many long term contracts are based on. I once brokered deals in the fuel oil markets (ships bunkers). There were a few delivery locations that were notorious for off market deliveries to ships that could lower the price of a monthly supply contract delivery by as much as $40 per ton. The mechanism for the scam is usually more about volume than price. Think of it like a gas station filling up one car at a discount of $1 per gallon which then sets a lower price for an entire tank truck delivery to the station that day.

Welcome to the dark side of index pricing.   

Wed, 05/15/2013 - 23:37 | 3567827 Telemakhos
Telemakhos's picture

The price of a commodity might not reflect optimal price discovery but rather the machinations of interested parties? Color me surprised. I'm sure swift enforcement actions, of which these raids are the spearhead, will remedy the situation, develop a fair mechanism for price discovery that's immune to manipulation, and restore a truly free and efficient market without participants' cheating on the one hand or overbearing regulatory interference on the other. That'll happen right after Europe's debt crises are all finally solved for good and there's a hovercar in every driveway.

Whether there's manipulation of the Platts price is one question; another question is why the EU is launching these raids now.  The Europeans tolerate massive corruption almost as well as the Americans, and it's hard to imagine that price manipulation is new, so why investigate now?  Is there substantial fear that a price shock from energy inputs could further wreck damaged or fragile EU economies (i.e. Greece)?  Is this tied into wider concerns about the companies supplying data (McGraw Hill owns Platts and Standard & Poors, which ("oh, my bad") downgraded France by mistake two months early in November, 2011)?  Or is the EU just such a random and arbitrary organization that it's just now getting around to investigating something that may have been going on since 2002?

Thu, 05/16/2013 - 03:17 | 3568062 thisandthat
thisandthat's picture

Probably some whistleblower, or someone got caught redhanded on something and spilled the beans with some hard evidence.

Thu, 05/16/2013 - 04:18 | 3568098 EverythingFubar
EverythingFubar's picture

The main raids are on BP, Shell and Platts here in the UK. One theory is that this is a PR move to counter the massive anti-EU sentiment that is growing daily. If the EU can be seen to be doing good things for us here in Britain, it looks like there is value in being in the EU. Petrol prices are a very big deal here for Joe Public. Our prices are much higher thant the US. Of course most of it is Government tax but hey ho..

 

Thu, 05/16/2013 - 04:37 | 3568104 Sandmann
Sandmann's picture

Not so. They don't move so quickly and the EU is more popular in the Uk than in France according to Pew. Stop being a narcissist.

Germany flagged up collusion a year ago and has been looking at coordinated price increases on Thursdays. These issues were discussed at the G20 and the ConAgra scam pushing prices to $147/bbl shows how easily manipulated the oil price is. Natural gas prices in EU are tied to Oil prices as are animal feed prices. It is a major cause of sluggish growth.

However, watch oil prices climb now that the Israelis are set on confrontation with Russia

http://debka.com/article/22970/Syrian-Israeli-war-of-words-via-Putin-edg...

Thu, 05/16/2013 - 00:28 | 3567935 lolmao500
lolmao500's picture

Here's another scandal for ya...

http://www.thegatewaypundit.com/2013/05/breaking-holder-justice-departme...

Breaking: Holder Justice Department Also Tapped House of Representatives Cloak Room

HH: The idea that this might be a Geithner-Axelrod plan, and by that, the sort of intimation, Henry II style, will no one rid me of this turbulent priest, will no one rid me of these turbulent Tea Parties, that might have just been a hint, a shift of an eyebrow, a change in the tone of voice. That’s going to take a long time to get to. I don’t trust the Department of Justice on this. Do you, Congressman Nunes?

DN: No, I absolutely do not, especially after this wiretapping incident, essentially, of the House of Representative. I don’t think people are focusing on the right thing when they talk about going after the AP reporters. The big problem that I see is that they actually tapped right where I’m sitting right now, the Cloak Room.

HH: Wait a minute, this is news to me.

DN: The Cloak Room in the House of Representatives.

HH: I have no idea what you’re talking about.

DN: So when they went after the AP reporters, right? Went after all of their phone records, they went after the phone records, including right up here in the House Gallery, right up from where I’m sitting right now. So you have a real separation of powers issue that did this really rise to the level that you would have to get phone records that would, that would most likely include members of Congress, because as you know…

HH: Wow.

The cloakrooms serve as a place for members to socialize, eat, and take naps without leaving the building. These rooms are closed to all except for Senators and Representatives, and a few of their trusted staffers, and even have their own phone numbers.

Thu, 05/16/2013 - 00:39 | 3567949 grimey
grimey's picture

The purpose of the crude price manipulation is to shift profits from refineries, which are typically  located in politically stable countries with low risk of nationalization but higher tax rates, to exploration in countries that are typically low tax and corrupt. I suspect the EU decided the tax revenues to be gleaned by repatriating those future refining profits outweighed the potential cost of scaring commodity traders into fleeing to Switzerland and Houston and other similar criminal sanctuaries. I'm taking $70/bbl as being pretty likely and expect a move down in crude over the next few weeks as the accused spit polish their cowlicks and play like choirboys while they're being watched, and positioning accordingly. 

Thu, 05/16/2013 - 01:06 | 3567977 Urban Redneck
Urban Redneck's picture

1/3 of the world's paper oil already flows through Geneva, if they let any more paper oil in they're going to have to allow some more immigration to help with the paper pushing, because it's a really small and specialized group of guys that's responsible for the current volume. 

Thu, 05/16/2013 - 04:42 | 3568110 Sandmann
Sandmann's picture

Cut credit lines to speculators and impose a bear squeeze

Thu, 05/16/2013 - 00:51 | 3567970 CrashisOptimistic
CrashisOptimistic's picture

So you build a 30 story tall structure, in segments, ship them to a coastline, assemble them at sea, then install a 50,000 or whatever horsepower marine engine on it, helicopter a crew out, drive the rig 5000 miles to an offshore drill site, drill, find no oil, do the same thing again 3 more times and find some oil on the 4th drilling.

And all this is a cost of $35/barrel?

Thu, 05/16/2013 - 05:16 | 3568128 Poor Grogman
Poor Grogman's picture

All that worrying about cost is for the sheeple.

It is the global financial ponzi that needs oil, and what the system needs the system gets.

You don't think that with all that ability to manipulate everything, the
PTB would just sit quietly by and watch their system die???

That would be asking for the sheeple to become restless no?

Thu, 05/16/2013 - 01:49 | 3568013 q99x2
q99x2's picture

Hope they get the elite enemies of the world. The EU doesn't have Holder but they might have some similar gatekeeper.

Thu, 05/16/2013 - 02:05 | 3568019 flyingpigg
flyingpigg's picture

The comparison with Libor is misplaced. The Platts window (MOC) is a trading window with firm bids and offers. So it's not like ten years ago when Platts reporters were making a round to ask info about spot deals. If you offer too low or bid too high in the MOC someone will take you out. Big players can still manipulate as in every other market but it will take significant size to take out all the bids or offers in a liquid market as the gasoline or oil market.

Thu, 05/16/2013 - 02:42 | 3568039 dunce
dunce's picture

The Norwegian govt. is the major shareholder in Statoil, are they going to arrest the govt. for price fixing? I do not know if it is true but i was told that the royal family in the Holland is a large share holder of RDS. Will the arrest the Queen?

Thu, 05/16/2013 - 03:24 | 3568065 thisandthat
thisandthat's picture

fines

Thu, 05/16/2013 - 04:40 | 3568109 Sandmann
Sandmann's picture

The Norwegians are highly likely to favour price-fixing on oil prices - it is not the USA where Americans protest in the streets for the rights of Exxon and Big Oil to manipulate prices.

Thu, 05/16/2013 - 03:44 | 3568079 forgeron1
forgeron1's picture

"The eu commission are commies seriously raiding the office of a non member state company? On what grounds, they are actively destroying sovereign Europe state by state"

Norway is a member of the EEA, a treaty between the former EFTA (those countries that stayed outside the EU) with the EU--according to this treaty it follows EU rules in all economic aspects.

Thu, 05/16/2013 - 04:38 | 3568108 Sandmann
Sandmann's picture

The EU Commission operates through NATIONAL agencies that is how the EU works unlike the USA which has Federal Agencies trampling on States Rights

Thu, 05/16/2013 - 05:00 | 3568122 Frastric
Frastric's picture

"After the Libor rigging scandal in 2012, authorities have sharpened their act, deeply scrutinizing company financial records, and implementing stricter regulations"

WHAT??? Yet junk bond buying, securitization of subprime auto loans and student loans goes unchallenged?

Sticter regulations my ass!

Thu, 05/16/2013 - 05:51 | 3568135 Catullus
Catullus's picture

Smells like desperation from a failed state. Shakedown.

Thu, 05/16/2013 - 05:55 | 3568136 Pretorian
Pretorian's picture

Oil companies are part of the same Cartel who use to attack EU credit market. Expect revenge, worsening EU credit condition again. I hope they fine them 5 year revenues to make up the cost people and companies suffered in the last decade. 

Thu, 05/16/2013 - 05:54 | 3568137 FJ
FJ's picture

Crooks on both sides fighting each other for what's left in the jar...yummy

Thu, 05/16/2013 - 05:57 | 3568138 CrashingDollars
CrashingDollars's picture

It's always nice to see rules enforced.  Too bad it comes around about as often a halleys comet.

Thu, 05/16/2013 - 06:21 | 3568151 Racer
Racer's picture

And they are trying their best to manipulate gold so people sell them their physical, but all it is doing is making it unavailable to buy and now there is premium where it used to be 3% it is now 14% that is IF you can get any

Thu, 05/16/2013 - 06:47 | 3568174 THE DORK OF CORK
THE DORK OF CORK's picture

Or lets investigate why the euro boys pushed resources, capital & labour ever upwards beyond nation state borders to create chaotic energy & social conditions in the periphery and why they wish to continue their war like damage on former nation states & their cultures via a so called banking union beyond any even token democratic control.

 

Sum of all Irish petro consumption 
(available final energy consumption)

Y1990 : 3,942ktoe
Y1998 : 6,214ktoe
Y2008 : 8,896 ktoe (peak)
Y2011 : 6,958 Ktoe
Y2012 : 6,358 Ktoe

Me thinks it was the euro that did it somehow,

We are not only bailing out the European financial industry but also doing our bit for its symbiotic car industry with BMW Ireland creating the last bit of wasteful credit money in the Irish system.....destroying what little capital we have remaining.
A immediate ban on private car purchase should be instated in the Euro PIig countries until we can get our (Irish) stock of private cars down to the 1990 number of 800,000 rather then the present absurd 1.8 million ~ leaving no oil / energy for rational fixed capital creation such as tram fixed capital expenditure.

Thu, 05/16/2013 - 08:16 | 3568322 overmedicatedun...
overmedicatedundersexed's picture

be interesting to see the reaction of our peak oil the world is finite crowd, on high energy prices, which side will they fall on it's price manipulation or it's just we are out of cheap oil, can't have it both boys.

Thu, 05/16/2013 - 08:41 | 3568386 orangegeek
orangegeek's picture

Euro government is about to collapse.  So why not divert attention and go after something that makes government look like they do something.

 

The Euro lemmings must be proud of their government and how they take care of them against the big bad oil companies.

 

Oh...and the real issue?  Uh, Europe is on the road to financial collapse - thanks Euro government.

Thu, 05/16/2013 - 10:58 | 3569077 KCMLO
KCMLO's picture

Not to get too far off the topic... but how is shadow inventory in housing held by banks not price fixing?  I know this is probably a silly question to pose to this forum considering most will answer "it is."  But I would honestly like to know the mouthpiece party line on this one.  Just curious what their excuse is.

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