BP, Shell raided in price fixing probe

May 15, 2013
The Age

Investigators carried out raids at BP’s offices in Canary Wharf and Shell’s offices in both London and Rotterdam on Tuesday.

Raids were also carried out at the London office of price-reporting agency Platts and the Stavenger office of Norway’s Statoil, both of which are also under investigation.

Details of the European Commission investigation emerged in late afternoon trading on Tuesday and appeared to have negligible impact on the share prices of either oil giant.

MPs and officials have suggested the oil price could be vulnerable to being rigged in the same way as the Libor lending rate was rigged by banks, in a scandal that led to senior resignations and huge regulatory fines.

Both oil majors have petrol forecourts across the UK and, as well as the reaction of the markets, will be keen to manage the risk of reputational damage among motorists. “Public relations is important to oil companies so they will be taking it seriously,” one industry source said.

However, analysts appeared initially sceptical that the EC probe would prove similarly significant to the oil companies as Libor has to banks.

The investigations are at early stages and the EC made clear that they do not imply guilt. Industry sources suggested the scale of fines, even if companies were found culpable, would not be great.

Peter Hutton, oil analyst at RBC Capital Markets, said: “It’s hard to see at this stage what we should be reacting to. It’s under investigation, it’s still very early days, and people don’t know the scale or any culpability.”

The EC said it had “concerns” that several companies may have colluded in manipulating the benchmark price for “a number of oil and biofuel products” by providing distorted prices to the price-reporting agency and by excluding other companies from taking part in the price-setting process.

Prices reported by agencies such as Platts are used as the benchmarks for trade in a huge number of products, including the petrol price.

The EC 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 anti-competitive practices”.

A BP spokesman said: “BP is one of the companies that is subject to an investigation that was announced earlier today by the European Commission. We are cooperating fully with the investigation and unable to comment further at this time.”

A Shell spokesman said: “We can confirm that Shell 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 said it “confirms that the European Commission has undertaken a review at its premises in London this morning in relation to the Platts price assessment process. Platts is cooperating fully with the European Commission’s review.”
The Telegraph, London

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