Oil Price Manipulation Damages Mirror Libor: EU

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The European Union Competition Commissioner Joaquin Almunia said that the oil price manipulation may have caused huge damages to consumers. The EU antitrust regulators compared it with the ongoing investigation into the bank manipulation of London interbank offered rate or Libor.

Oil Price Manipulation Damages Mirror Libor: EU

On May 14, the regulators carried out unannounced raids at the offices of several energy companies including BP Plc (NYSE:BP) (LON:BP), Royal Dutch Shell plc (ADR) (NYSE:RDS.A) (NYSE:RDS.B), Statoil ASA (NYSE:STO) and price reporting agency Platts. The regulators are probing into whether the oil companies provided false data to the price reporting agency to manipulate the benchmark oil prices including North Sea Dated Brent which is the basis of more than 50 percent of the world’s crude oil pricing. Regulators claim these firms have also used their strong market position to prevent other oil firms to participate in the pricing process.

Third Benchmark Manipulation In Less Than Two Years

Price reporting agencies like Platts derive benchmark prices using self-reported transaction data by oil companies. Platts as well as the three oil companies said they have been cooperating with the regulators. The oil price manipulation probe highlights how the energy markets pricing lacks transparency of financial products, says Stephanie Bodoni of Bloomberg.

It’s the third time since 2012 that regulators are investigating into global pricing benchmarks after Libor and ISDAFix, a pricing standard for the $379 trillion swaps market. EU Competition commission has become extra cautious after the Libor manipulation where big banks including Barclays Plc (NYSE:BCS) (LON:BARC), UBS AG (NYSE:UBS) and Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS), and others have been collectively fined over $2.5 billion, and more than a dozen banks are still under investigation.

Millions of Europeans Would Have Been Affected By Oil Price Manipulation

Though it is still too early to draw conclusions, Competition Commissioner Joaquin Almunia’s comments underscore what his aide Alexander Italianer said last week. Talking about the possible magnitude of the oil price manipulation, Italianer said that millions of Europeans would have been affected by the manipulation under investigation.

Alexander Italianer said on May 24 that the regulator’s goal is to make sure that the oil firms haven’t colluded to manipulate the oil prices, and they haven’t prevented other firms from participating in the pricing process.

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