EC Launches Price Fixing Probe into Oil Majors

The offices of oil companies Shell, BP and Statoil have been raided by European Commission (EC) officials as part of an inquiry into allegations of price fixing. All three companies have confirmed they are participating in investigations.

The unannounced inspections, which included the London offices of BP and Shell and Statoil’s offices in Norway, were to investigate claims that the 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.”

According to the EC the alleged price collusion, which may go back as far as 2002, could have had a major impact on the price of petrol at the pumps “potentially harming final consumers”.

Although the authorities declined to name the companies raided, BP, Shell, Statoil and also Platts, the world’s leading oil price reporting agency, confirmed they were under investigation. A statement by Shell read: “We can confirm that Shell companies are currently assisting the European Commission in an inquiry into trading activities.” BP made a similar announcement.

Statoil, which is 67%-owned by the Norwegian government, commented: “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),” which refers to market manipulation.

In a commentary issued in response by Fitch, the credit ratings agency (CRA) noted: “Any fines imposed on major European oil companies as a result of the EC’s investigation into alleged price manipulation would most likely be manageable, given the big cash reserves all these producers hold.

“The potential longer-term impact from reputational damage or closer regulatory oversight, if the probe uncovers wrongdoing, is uncertain.”

The raids came after growing concern that energy trading had become an area of potential market abuse, with similarities to the banking sector’s London interbank offered rate (Libor) rigging scandal.

An article highlighting these concerns appeared in the Financial Times earlier this month, triggering a response from Platts’ president, Larry Neal, who wrote to the paper: “Your comparison of PRA activity to Libor is a false one … While PRAs do obtain information from ‘traders who may have a vested interest in moving the markets, the agencies do not have any such vested interest. In contrast, our role is providing market transparency.”

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