WORLD NEWS TOMORROW | WNT NEWS: Could oil and petrol prices have been manipulated like Libor? That’s the growing fear among regulators and politicians who have remarked on the striking similarities in the processes for setting interest rates that were rigged by traders at Barclays and other banks, and the oil price averages that determine the cost of filling your tank.
According to a G20 report, compiled by the International Organisation of Securities Commissions (IOSCO), traders are likely to have ‘distorted and manipulated’ oil prices in the same way as interest rates. The price motorists pay for fuel at the forecourts is determined by retailers who use oil price ‘benchmarks’ to decide how much to pay for future supplies.
This price is calculated by two main price reporting agencies – Platts and Argus – on data which is collected from firms which trade oil on a daily basis, like banks, hedge funds and energy companies.But like Libor – the interest rate measure that Barclays was earlier this month found to have rigged – the market is not regulated. Instead it relies on the honesty of firms to submit accurate data.
This may have led to drivers paying over the odds to fill their tank, as petrol retailers buy their products based on the prices reported by the agencies.The Daily Telegraph reported yesterday that US regulators have already highlighted the likelihood that oil prices might have been fixed.
Commissioner Scott O’Malia of the US Commodity Trading Commission has spoken of the ‘striking similarity’ between price reporting agencies in the oil market and Libor.Robert Halfon, the Conservative MP for Harlow, who with 100 fellow MPs has campaigned for lower petrol prices and who also backed the successful campaign for Chancellor George Osborne to scrap a planned 3p fuel duty rise which was set to hit next month, said the Bank of England needs to investigate potential manipulation ‘urgently’.
The Petrol Retailers’ Association also supports an inquiry. It said: ‘All the petrol retailers buy their products based on Platts prices. If IOSCO thinks the price is open to manipulation it could well be and that would affect prices on the forecourts.’
Platts and Argus have hit back over the claims and argue that they employ independent journalists to investigate data and weed out any false reports submitted by oil traders.But the IOSCO points out that the system relies heavily on the ‘experience and training’ of journalists to make a judgement about what the oil price should be.Both agencies, in a joint statement, said that there are ‘fundamental differences’ in the way they calculate oil prices and the way Libor is estimated.
They said: ‘Independent price reporting organisations are independent of and have no vested interest in the oil and energy markets.’ Unleaded prices reached a record high of 137p per litre in April. Prices have since fallen back down to the 132p mark.