Senator wants US to join EU probe into oil price manipulation

Days after the European regulator raided the offices of three oil giants over allegations of manipulating the oil price benchmark for over a decade, the chairman of the US Senate's energy committee yesterday urged the country's regulator to also launch a probe to find out whether they had manipulated fuel prices for US consumers.

Senator Ron Wyden, chairman of the Senate Energy and Natural Resources Committee, wrote a letter to the Eric Holder, attorney general of the US Department of Justice (DoJ) to join the European investigation into whether oil companies manipulated oil prices by submitting false reports to Platts, an energy industry data service owned by New York-listed McGraw-Hill.

Early this week, the European Commission (EC) raided the offices of oil giants, including Royal Dutch Shell, BP and Statoil into whether they colluded in reporting distorted prices to a Platts to manipulate the published prices for a number of oil and biofuel products for over a decade in the over $2.5 -$3 trillion-a-year global oil market. (See: EU regulator raids oil giants over price manipulation)

"Efforts to manipulate the European oil indices, if proven, may have already impacted US consumers and businesses, because of the interrelationships among world oil markets and hedging practices," wrote Senator Wyden in his letter.

"These effects on American business make it imperative that your task force investigate whether any firms ... may be using false information to manipulate oil prices here or abroad," the letter added.

The DoJ did not reveal whether it would conduct the probe but said that it was reviewing Wyden's request.

The investigation into oil benchmarks comes after one of Europe's largest energy trading companies, Total Oil Trading SA, the trading arm of French oil giant Total, and Hungary's Pannonia Ethanol had complained last year to the Brussels-based regulator on inaccurate pricing on several occasions in the benchmarks for crude and oil products.

The prices assessed and published by price reporting agencies like Platts serve as benchmarks for trade in the physical and financial derivative markets for a number of commodity products in Europe and globally.

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 harm final consumers.

According to Total's estimates, nearly 80 per cent of all crude and oil product transactions are linked to reference prices like those published by Platts, the world's largest oil price reporting agency, while  the remaining 20 per cent are linked to exchange-traded futures on Nymex and ICE.

Many analysts say that the prices could be easily manipulated since prices are disclosed voluntarily by firms buying and selling in the same market.

''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,'' the EC has said in the statement.

''Furthermore, the Commission has concerns that the companies may have prevented others from participating in the price assessment process, with a view to distorting published prices,'' it had added.

The alleged oil price manipulation is similar to the Libor scandal. (See: Britain's SFO launches criminal probe into Libor fixing scam at Barclays)