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SFO considers criminal inquiry into alleged price fixing by oil firms SFO considers criminal inquiry into alleged price fixing by oil firms
(about 4 hours later)
The Serious Fraud Office said on Thursday it is considering a criminal inquiry into alleged price fixing at BP and other oil companies already being investigated by European competition authorities.The Serious Fraud Office said on Thursday it is considering a criminal inquiry into alleged price fixing at BP and other oil companies already being investigated by European competition authorities.
The move follows a request to the SFO from the Conservative MP Robert Halfon, a leading fuel price campaigner, and comes after the European commission's dawn raids on Wednesday at BP, Shell and the Norwegian oil company Statoil.The move follows a request to the SFO from the Conservative MP Robert Halfon, a leading fuel price campaigner, and comes after the European commission's dawn raids on Wednesday at BP, Shell and the Norwegian oil company Statoil.
The SFO said in a statement: "The director of the SFO has not at this time made a decision to accept this matter as a criminal investigation but we are urgently reviewing the matter."The SFO said in a statement: "The director of the SFO has not at this time made a decision to accept this matter as a criminal investigation but we are urgently reviewing the matter."
After the commission's raids, David Cameron said that anyone found guilty of wrongdoing would feel the "full force of the law".After the commission's raids, David Cameron said that anyone found guilty of wrongdoing would feel the "full force of the law".
The move by the SFO is the latest of a series of manoeuvres aimed at cracking down on energy firms and their markets.The move by the SFO is the latest of a series of manoeuvres aimed at cracking down on energy firms and their markets.
There has been increasing concern among governments and regulators that the problems exposed by the Libor  rates scandal – where financial markets were shown to be open to manipulation – could be replicated in commodities trading.There has been increasing concern among governments and regulators that the problems exposed by the Libor  rates scandal – where financial markets were shown to be open to manipulation – could be replicated in commodities trading.
Gas and oil is often bought and sold "over the counter", but the prices are provided to independent price reporting agencies (PRAs), which use them to set benchmark costs.Gas and oil is often bought and sold "over the counter", but the prices are provided to independent price reporting agencies (PRAs), which use them to set benchmark costs.
Those in turn may have multimillion-pound derivative or other financial contracts attached to them. But because such over-the-counter trades are outside regulated markets, they can be unreliable and leave benchmarks vulnerable to manipulation. The knock-on effects can mean consumers paying more for energy.Those in turn may have multimillion-pound derivative or other financial contracts attached to them. But because such over-the-counter trades are outside regulated markets, they can be unreliable and leave benchmarks vulnerable to manipulation. The knock-on effects can mean consumers paying more for energy.
Potential abuse of the price reporting system in energy trading was highlighted last year when the Guardian revealed unusual gyrations in wholesale gas trading.Potential abuse of the price reporting system in energy trading was highlighted last year when the Guardian revealed unusual gyrations in wholesale gas trading.
The paper's report led to an escalating review by the Financial Services Authority (now the Financial Conduct Authority) and the energy regulator, Ofgem. These inquiries are looking at possible trader abuse and the activities of PRAs.The paper's report led to an escalating review by the Financial Services Authority (now the Financial Conduct Authority) and the energy regulator, Ofgem. These inquiries are looking at possible trader abuse and the activities of PRAs.
The umbrella body for global regulators, Iosco, has already called on price reporting agencies to improve their methodology for fear it could damage wider benchmarks increasingly used in the pricing of billion-pound long-term gas contracts, with suppliers including Britain and Russia.The umbrella body for global regulators, Iosco, has already called on price reporting agencies to improve their methodology for fear it could damage wider benchmarks increasingly used in the pricing of billion-pound long-term gas contracts, with suppliers including Britain and Russia.
But Iosco pulled back from introducing tough regulation despite concerns such as those raised by the French oil firm Total, which told it in a written submission: "Sometimes the criteria imposed by PRAs do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer."But Iosco pulled back from introducing tough regulation despite concerns such as those raised by the French oil firm Total, which told it in a written submission: "Sometimes the criteria imposed by PRAs do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer."
Other oil firms including Statoil have since said they no longer talk to PRAs.Other oil firms including Statoil have since said they no longer talk to PRAs.
The EU is also planning to publish a report in the next couple of months on how to tighten up energy benchmarks but has taken the most dramatic action so far with this week's raids on BP, Shell, Statoil of Norway, and the London office of Platts, a PRA which claims that 60% of the world's oil is valued on the back of its daily assessments of the price of North Sea Brent crude.The EU is also planning to publish a report in the next couple of months on how to tighten up energy benchmarks but has taken the most dramatic action so far with this week's raids on BP, Shell, Statoil of Norway, and the London office of Platts, a PRA which claims that 60% of the world's oil is valued on the back of its daily assessments of the price of North Sea Brent crude.
The European commission said some of the abuses could date back 10 years, and warned that even small distortions of assessed prices could have a "huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers".The European commission said some of the abuses could date back 10 years, and warned that even small distortions of assessed prices could have a "huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers".
It suspects that firms "colluded in reporting distorted prices" to agencies that publish the data used to set the price of oil and petrol.It suspects that firms "colluded in reporting distorted prices" to agencies that publish the data used to set the price of oil and petrol.
In letters to the SFO and City of London police, Halfon said action by the commission could be helpful but was "no substitute for domestic action by Britain's authorities". A long-time campaigner against high petrol prices, he has demanded tough prison sentences and windfall taxes on the companies involved, with all the money used to cut fuel duty.In letters to the SFO and City of London police, Halfon said action by the commission could be helpful but was "no substitute for domestic action by Britain's authorities". A long-time campaigner against high petrol prices, he has demanded tough prison sentences and windfall taxes on the companies involved, with all the money used to cut fuel duty.
Many MPs are angry that the commission raids came just four months after a "limp-wristed" inquiry by the UK's own Office of Fair Trading gave the industry a clean bill of health.Many MPs are angry that the commission raids came just four months after a "limp-wristed" inquiry by the UK's own Office of Fair Trading gave the industry a clean bill of health.
The OFT was forced to defend a study it published in January which concluded that, while there was widespread mistrust in how the petrol market was working, its analysis suggested competition was "working well".The OFT was forced to defend a study it published in January which concluded that, while there was widespread mistrust in how the petrol market was working, its analysis suggested competition was "working well".
But there have been repeated claims by the RAC and other motoring groups that pump prices were quick to respond to a rise in the wholesale oil price and slow to respond to a fall in global crude values.But there have been repeated claims by the RAC and other motoring groups that pump prices were quick to respond to a rise in the wholesale oil price and slow to respond to a fall in global crude values.
Oil firms have always been keen to highlight how the vast bulk of forecourt petrol prices is made up of taxes but motorists have questioned how BP and Shell make vast profits every year while claiming to be making next to nothing from petrol sales.Oil firms have always been keen to highlight how the vast bulk of forecourt petrol prices is made up of taxes but motorists have questioned how BP and Shell make vast profits every year while claiming to be making next to nothing from petrol sales.
Equally, fuel poverty campaigners have questioned how companies such as Centrica, the owner of British Gas, can rake in profits of £2.7bn at a group level, including £600m from its retail business, yet claim to be operating on small profit margins in domestic supplies.Equally, fuel poverty campaigners have questioned how companies such as Centrica, the owner of British Gas, can rake in profits of £2.7bn at a group level, including £600m from its retail business, yet claim to be operating on small profit margins in domestic supplies.
The oil companies at the centre of the commission inquiry into petrol fixing have all denied wrongdoing; Centrica and the other "big six" utilities that provide gas and electricity to Britain have also denied any rigging of the gas market.The oil companies at the centre of the commission inquiry into petrol fixing have all denied wrongdoing; Centrica and the other "big six" utilities that provide gas and electricity to Britain have also denied any rigging of the gas market.
Many of the large domestic power providers, including SSE, have found themselves deeply unpopular with politicians and the public after being fined by the energy regulator, Ofgem, for extensive mis-selling of products or other abuses of their operating licences.Many of the large domestic power providers, including SSE, have found themselves deeply unpopular with politicians and the public after being fined by the energy regulator, Ofgem, for extensive mis-selling of products or other abuses of their operating licences.
In this critical environment, the petrol, gas and electricity firms, many of which are highly active on the wholesale commodity markets, are acutely vulnerable to reputational damage should an inquiry conclude they have been rigging the system.In this critical environment, the petrol, gas and electricity firms, many of which are highly active on the wholesale commodity markets, are acutely vulnerable to reputational damage should an inquiry conclude they have been rigging the system.
The issue arose at the Centrica annual meeting on Monday when one critic dubbed the firm "the evil empire".The issue arose at the Centrica annual meeting on Monday when one critic dubbed the firm "the evil empire".
Also at the meeting, John Thompson a representative from the Fuel Poverty Action group asked about price fixing: "I watched a video on the Guardian website where it was a secret recording and a market participant alleges that one energy company in the UK 'were notorious for it; they got into trouble in the past and they stopped six months ago'. I wondered: is that our company?"Also at the meeting, John Thompson a representative from the Fuel Poverty Action group asked about price fixing: "I watched a video on the Guardian website where it was a secret recording and a market participant alleges that one energy company in the UK 'were notorious for it; they got into trouble in the past and they stopped six months ago'. I wondered: is that our company?"
Roger Carr, Centrica's chair, answered: "Any allegations of price rigging, price fixing, are not [to do with] the company you own, that is not the ethos. It is not what we do. It is not part of our ethos and it would be completely unacceptable if anyone in this organisation went anywhere near that."Roger Carr, Centrica's chair, answered: "Any allegations of price rigging, price fixing, are not [to do with] the company you own, that is not the ethos. It is not what we do. It is not part of our ethos and it would be completely unacceptable if anyone in this organisation went anywhere near that."
BP Complains of 'irreparable damage' over Gulf spill compensation
BP has filed court documents in the US complaining that "irreparable damage" is being done to the company by unfair or inappropriate compensation payments being made from its US Gulf reparation fund.
The British oil company set aside $7.8 bn (£5.2bn) last year when it came to a settlement with 100,000 people and companies, but is now saying the system is being abused and the figure will be higher.
BP declined to comment on speculation that it was planning to ask David Cameron to raise the issue with US president Barack Obama at the forthcoming G8 summit in Northern Ireland.
Analysts said the strength of the company's balance sheet made it very unlikely that BP could be "knocked over" by the escalating cost of compensation from the Macondo well blowout in 2010.