The European Commission carried out raids at the offices of several oil companies including Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B), BP plc (NYSE:BP) (LON:BP) and Statoil ASA (NYSE:STO) of Norway that are involved in pricing oil, biofuels and refined products.
The antitrust officials were concerned that the companies might have colluded to report manipulated prices to a price reporting agency. The Commission officials said that these firms may also have prevented other companies from participating in the oil pricing process.
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The European regulators said that inspections were conducted in two EU member states. The price reporting agency Platts was also investigated. Platts has an electronic pricing window where firms place bids and offers, and strike deals that are used by the price reporting agency to formulate price assessments. In March, Platts announced to launch a quality premium for Oseberg and Ekofisk crudes. These two, along with the other two grades are used to make up the Dated Brent marker, says Jonas Bergman of Bloomberg. Platts’ announcement came just two weeks after Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B) adjusted its trading contract for Brent.
Benchmark Pricing Model
The price reporting agencies like Platts play a key role in setting benchmarks for billions of dollars of energy trading. These benchmarks are also used in calculating household energy bills. Platts depends on bid and offer quotes instead of actual transactions to establish benchmark prices, according to the Financial Times. The European Commission is scrutinizing the model as the regulators have become extra-cautious about benchmark pricing after Libor manipulation.
Statoil ASA (NYSE:STO) said that the suspected violations are about Platts’ price assessment process, and it may have been going on since 2002. Platts told Bloomberg that European Commission officials undertook a review at its London office today, and it has been cooperating fully with the regulators.