Search This Blog

Showing posts with label BP. Show all posts
Showing posts with label BP. Show all posts

Wednesday 15 May 2013

Petrol price 'rigged for a decade'



Motorists may have paid thousands of pounds too much for their petrol over the last decade, after two of Britain’s biggest companies were raided on suspicion of manipulating oil prices.

Petrol pump
European investigators said the alleged price-rigging could have had a 'huge impact' on the cost of oil Photo: ALAMY
MPs and energy experts tonight raised fears motorists have been “taken for a very expensive ride”, after officials searched the offices of BP and Shell for evidence of price-rigging.
The companies are suspected of distorting the oil price since 2002, meaning drivers have potentially been ripped off for more than 10 years.
Over that time, petrol prices have risen dramatically by more than 80 per cent to around 135p per litre.
European investigators, who raided the London offices of BP and Shell, said the alleged price-rigging could have had a “huge impact” on the cost of oil, including the price of fuel for consumers.
The investigation into market-fixing already has echoes of the Libor scandal, which saw the banks falsely report key interest rates used to calculate mortgages. It cost several British banks hundreds of millions of pounds in fines.
Robert Halfon, the MP for Harlow who has long campaigned for an investigation into the oil market, said high prices have been “crushing families across Britain”.
He called for UK authorities to launch an urgent inquiry and for oil companies to “come clean and show some responsibility for what is happening to the international price”.
The raids were part of an investigation across the continent by the European Commission’s competition authorities. Offices owned by Platts, a price-reporting agency, and Statoil, a Norwegian oil company, were also raided.
European officials said several companies may have colluded in manipulating the price of both oil and green “biofuels”.
This could have happened if the oil companies provided false information to Platts, the main reporting agency that collects and reports prices to the wider market.
“Any such behaviour, if established, may amount to violations of European antitrust rules that prohibit cartels and restrictive business practices and abuses of a dominant market position,” the European Commission said.
“Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers.”
It said the raids were a “preliminary step to investigate suspected anticompetitive practices” and “does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself”.
The inquiry comes after The Daily Telegraph revealed growing concerns about the reliability of oil prices last year.
A study for G20 finance ministers, including George Osborne, said traders from banks oil companies and hedge funds have an “incentive” to distort the market and are likely to try to report wrong prices.
Scott O’Malia, a top official at the US Commodities Futures Commission, has also previously drawn attention to the “striking similarity” between the potential for manipulating oil and Libor. The price reporting agencies strongly deny any similarities between their methods and the way Libor was calculated.
The information published by Platts and other reporting agencies is used widely by companies as a guide for pricing their oil-related products, including petrol.
Brian Madderson, chairman of the Petrol Retailers’ Association, tonight said any manipulation of the benchmark oil price over a decade could have cost motorists “thousands of pounds each”.
He said the PRA has repeatedly warned the regulators that the oil price appears to have been manipulated.
An 8p rise in the price of petrol last winter cannot be explained by basic supply and demand, unusual geopolitical events or other factors, he said.
Like Libor – the interest rate measure that banks were found to have rigged – the market is unregulated and relies on the honesty of the firms to submit accurate data about all their trades.
Lord Oakeshott, a senior Liberal Democrat and former Treasury spokesman, urged the UK authorities to take a closer look at the oil market.
“Rigging oil prices would be as serious as rigging Libor,” he said. “The price of energy ripples right through our economy and really matters to every business and families.
“All credit to the European Commission for taking action if they have evidence of collusion-but why have we had to wait for Brussels to find out if British oil giants are ripping off British consumers?
"I will be putting down parliamentary questions asking who has UK regulatory responsibility for ensuring fair and open competition in the oil market and what action they have taken in the past 5 years to investigate and enforce it.”
The oil companies tonight confirmed their offices have been raided.
A spokesman for BP said the company is “cooperating fully with the investigation and unable to comment further at this time.”
A Shell spokesman also confirmed its companies are “currently assisting the European Commission in an enquiry into trading activities”.
“We are fully cooperating with the investigation. For legal reasons we cannot make any further comment at this stage”.
Platts, the price-reporting agency, said the European Commission has “undertaken a review at its premises in London” and confirmed it is “cooperating fully”.

Sunday 21 October 2012

Corporate Social Responsibility (CSR) - a Cloak for Crooks


The government's new Companies Bill will reportedly ask large companies to spend 2% of their net profit on CSR (corporate social responsibility). The theory is that corporates must aim for social goals, not just profits.
It's unclear whether the 2% allocation will be compulsory or indicative. In either case, this misses altogether what corporate social responsibility actually is. It is an ethical attitude, a determination to observe the highest standards in dealing with all stakeholders - customers, suppliers, shareholders. CSR means observing the highest standards in dealing with health and environmental hazards, and in presenting corporate accounts accurately. If a company cheats its stakeholders, fiddles its accounts and ignores hazards, then it is grossly irresponsible whether or not it spends 2% of profits on some list of government-approved social activities.
Last week the Enforcement Directorate attached Rs 822 crore of fixed deposits of the erstwhile Satyam Computer Services. The Satyam scam was the biggest in corporate history. Promoter Ramalinga Raju made Satyam India's third-biggest IT company. But in 2009 Raju confessed he had fiddled the books for years, and forged certificates of bank deposits. This helped inflate the share price and enable Raju and family to borrow huge sums for real estate speculation.
Raju was India's biggest self-confessed crook. Yet he was much celebrated for CSR and won several awards. These included a UK government award for CSR in 2008.
His Byrraju Foundation took information technology directly to rural India. It set up a rural call centre, enabling villagers without college degrees to join the globalisation bandwagon. He took telemedicine to rural areas, enabling villagers to interact with specialist urban doctors. His foundation sought to build self-reliant rural communities, providing services like healthcare, education, water, sanitation and green awareness.
He ran an emergency ambulance service that reached sick and injured people within 30 minutes, ready with paramedics and equipment, and rushed them to hospital. This scheme attracted so much praise that many other states replicated it.
Lesson: a company that cheats shareholders, creditors and other stakeholders can parade as a paragon of corporate ethics, and win multiple awards. Allocating some profits for rural development and health is no indicator whatsoever of ethics. Rather, the CSR allocation can camouflage lack of ethics.
Many consumers have been duped by CSR awards. They are willing to pay more for products from such award winners. After the Satyam debacle, they should know better.
Worse than Satyam has been the oil multinational, BP. It caused the biggest environmental disaster in history when its Maconodo well exploded in the Caribbean Ocean after it failed to observe many safety procedures. This exposed as fraudulent its campaign to paint itself as a green saviour. Once called British Petroleum, it change its name to BP and launched a hugely successful image-building makeover calling itself "Beyond Petroleum". It got a new logo of a green and yellow sun (representing solar energy) to emphasise its green credentials. It boasted it was among the world's biggest producer of solar panels and windpower, although these accounted for barely 3% of its business, and actually represented public relations spending. "Beyond Petroleum" won two "Campaign of the Year" awards from PR Week, and an award from the American Marketing Association.
BP won the 2007 Prime Minister's CSR award in Malaysia for aiding a turtle sanctuary. Fortune magazine has an annual corporate accountability rating for CSR. BP topped the Fortune list in 2004, 2005 and 2007, and came second in 2006. The Chinese were taken in too: in 2007 they gave BP the "The Most Responsible Enterprise" award organized by China News Weekly and the Chinese Red Cross Foundation. BP won the Corporate Citizenship Award for Chinese enterprises several times.
Yet behind this image-manship, BP had a horrendous record of cutting corners and neglecting safety. Its poorly maintained refinery in Texas exploded in 2005, killing 15 and injuring 180. In 2007, a BP pipeline got corroded through neglect and leaked 200,000 gallons of crude into the pristine Alaskan wilderness. BP was fined $303 million to settle an accusation of conspiracy to manipulate the price of propane gas. Between 2007 and 2010, BP refineries in Ohio and Texas ran up 760 "egregious, willful" safety violations, while rivals Sunoco and ConocoPhillips each had eight, Citgo had two and Exxon had one comparable citation. So, BP accounted for 97% of all corporate refinery violations. 
Lesson: don't get fooled by corporate spending on CSR. Far from being evidence of ethics, it's often a cloak for gross misgovernance. If the Companies' Bill mandates 2% spending on supposed CSR, corporate ethics will not improve. Rather, more Satyams will emerge.