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| Europe Raids Oil Companies in Price Manipulation Inquiry | Europe Raids Oil Companies in Price Manipulation Inquiry |
| (34 minutes later) | |
| LONDON — Authorities on Tuesday raided the offices of several oil companies as well as an industry service provider, as part of a broader inquiry by the European Commission into potential price manipulation. | |
| Investigators descended on some European offices of BP, Royal Dutch Shell and Platts, a division of the McGraw-Hill Companies that specializes in providing pricing for the oil industry. European authorities are looking into whether the companies may have “colluded in reporting distorted prices” in an effort “to manipulate the published prices of a number of oil and biofuel products.” | |
| All of the companies said they were cooperating with the inquiry. | All of the companies said they were cooperating with the inquiry. |
| Shell said it was “assisting the European Commision in an enquiry into trading activities.” A spokesman said that the company’s offices in Rotterdam and London were “visited.” | Shell said it was “assisting the European Commision in an enquiry into trading activities.” A spokesman said that the company’s offices in Rotterdam and London were “visited.” |
| Platts said that the European Commission had “undertaken a review” at its offices, at Canary Wharf in London. The raiders also visited BP’s oil trading operations on the lower floors of the same building. BP said in a statement the the company was “subject to an investigation.” | Platts said that the European Commission had “undertaken a review” at its offices, at Canary Wharf in London. The raiders also visited BP’s oil trading operations on the lower floors of the same building. BP said in a statement the the company was “subject to an investigation.” |
| Regulators in Europe and the United States have long been worried about the system by which oil and gas prices are set, which can affect the prices consumers pay as well as costs for airline and trucking companies. The concerns reached a frenzied pitch in 2008 when oil prices hit record highs and then quickly plunged. Lawmakers in the United States and elsewhere questioned whether the prices were being distorted. | Regulators in Europe and the United States have long been worried about the system by which oil and gas prices are set, which can affect the prices consumers pay as well as costs for airline and trucking companies. The concerns reached a frenzied pitch in 2008 when oil prices hit record highs and then quickly plunged. Lawmakers in the United States and elsewhere questioned whether the prices were being distorted. |
| Authorities are focused in part on the price reporting system for oil and other petroleum products, which is dominated by a small group of companies like Platts. Such companies determine prices by polling traders and using other industry data. | Authorities are focused in part on the price reporting system for oil and other petroleum products, which is dominated by a small group of companies like Platts. Such companies determine prices by polling traders and using other industry data. |
| In recent years, Platts has instituted a so-called electronic window through which a significant amount of oil is traded these days. At the end of the day, Platts determines prices based on the trades that go through this system, rather than by simply relying on polling companies. | In recent years, Platts has instituted a so-called electronic window through which a significant amount of oil is traded these days. At the end of the day, Platts determines prices based on the trades that go through this system, rather than by simply relying on polling companies. |
| There are concerns in the industry that companies could distort the prices through a blizzard of last-minute trades. “If you want access to liquidity you are forced to use the window,” said a senior oil trader. But he also said that the window, in theory, should be more accurate than prices determined just by polling traders because the prices were determined by actual trades. | There are concerns in the industry that companies could distort the prices through a blizzard of last-minute trades. “If you want access to liquidity you are forced to use the window,” said a senior oil trader. But he also said that the window, in theory, should be more accurate than prices determined just by polling traders because the prices were determined by actual trades. |
| The benchmarks, notably Brent crude, are enormously influential. Much of the world’s oil, particularly outside of the United States, is priced in relation to Brent, which is made up of a basket of North Sea crudes. These benchmarks are also often used in the large futures and derivatives markets. | The benchmarks, notably Brent crude, are enormously influential. Much of the world’s oil, particularly outside of the United States, is priced in relation to Brent, which is made up of a basket of North Sea crudes. These benchmarks are also often used in the large futures and derivatives markets. |
| As production in the North Sea has dwindled, the Brent price has been based on lower volumes of oil, prompting fears that it could be manipulated, possibly by the major players in the region. The Brent price is actually determined through assessing prices of a blend of four North Sea crudes. | As production in the North Sea has dwindled, the Brent price has been based on lower volumes of oil, prompting fears that it could be manipulated, possibly by the major players in the region. The Brent price is actually determined through assessing prices of a blend of four North Sea crudes. |
| In recent years, various regulatory agencies have investigated price setting but seem to have come up with little evidence of manipulation. People in the industry say, however, that the controversy around both oil and gas prices has made companies increasingly reluctant to supply prices for fear of becoming the targets of regulators or lawsuits. | In recent years, various regulatory agencies have investigated price setting but seem to have come up with little evidence of manipulation. People in the industry say, however, that the controversy around both oil and gas prices has made companies increasingly reluctant to supply prices for fear of becoming the targets of regulators or lawsuits. |
| In 2010, the Group of 20 economically most developed nations asked the International Organization of Securities Commissions to look into the potential for manipulation and whether tighter regulation was needed. After a two-year investigation, the price reporting agencies last fall agreed to adopt a series of principles to deal with conflicts of interests and other issues. | In 2010, the Group of 20 economically most developed nations asked the International Organization of Securities Commissions to look into the potential for manipulation and whether tighter regulation was needed. After a two-year investigation, the price reporting agencies last fall agreed to adopt a series of principles to deal with conflicts of interests and other issues. |
| An 18-month trial period is under way. Compliance is to be monitored by an independent auditor. If the companies don’t go along, regulators may bar them from providing pricing benchmarks to exchanges, which is a source of revenue. | An 18-month trial period is under way. Compliance is to be monitored by an independent auditor. If the companies don’t go along, regulators may bar them from providing pricing benchmarks to exchanges, which is a source of revenue. |
This article has been revised to reflect the following correction: | |
| Correction: May 14, 2013 | |
An earlier version of this article misstated the day of the raid. It was Tuesday, not Thursday. |