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.

European investigators said the alleged price-rigging could have had a 'huge impact' on the cost of oil Photo: ALAMY

By Rowena Mason and Emily Gosden

9:57PM BST 14 May 2013

425 Comments

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.

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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”.

Justice and security bill is designed to stop disclosure of intelligence secrets

After recent embarrassments, the government wants to ensure no intelligence information emerges in civil court hearings again

• Richard Norton-Taylor and Ian Cobain
• guardian.co.uk, Tuesday 11 September 2012 14.38 BST

The government has tried to assuage opponents by keeping the relatively liberal Ken Clarke in charge of the bill. Photograph: Steve Parsons/PA

The justice and security bill is the direct result of evidence that emerged in court supporting allegations that MI5 and MI6 knew about the torture or inhuman and degrading treatment meted out by the CIA to terror suspects, including British citizens and residents, notably Binyam Mohamed.

The high court, later backed by senior judges in the court of appeal, ruled that information the CIA had passed to MI5 and MI6 should be disclosed. Washington was furious. The British government, and in particular David Miliband, the foreign secretary at the time, was deeply embarrassed.

There was a danger of further incriminating evidence emerging in court as UK citizens and residents who were held at Guantánamo Bay demanded compensation. To avoid disclosing what MI5 and MI6 may have known about the secret transfer of the detainees to the US military prison on Cuba and about their treatment, the government offered them expensive out-of-court settlements.

Under pressure from the security and intelligence agencies – and the US – the coalition government decided to introduce a statute designed to prevent any intelligence information from being disclosed in civil court hearings ever again.

The government argues that the bill would allow more intelligence information to be heard in court than hitherto, even though it would be heard in secret. A judge would decide whether the information should be kept secret. The bill's critics say that the way it is drafted means it would be extremely difficult for a judge to challenge any minister's claim that information should be kept secret on grounds of national security. The fact that a hearing would be held in secret could itself be kept secret.

Critics say the bill represents a creeping move towards more and more secret courts, based on the model of the special immigration appeals commission, where any evidence can be withheld from a defendant and his or her lawyers. Evidence of British collusion in the abuse and rendition of terror suspects to places where they risked being tortured – including evidence of MI6's role in the rendition in 2004 of two Libyan dissidents into the hands of Muammar Gaddafi's secret police in Tripoli – might never have seen the light of day had the bill been in place.

The government has tried to assuage opponents by keeping the role of steering the bill through parliament in the hands of the relatively liberal former justice secretary Ken Clarke, rather than his successor, Chris Grayling. Liberal Democrat ministers have sought credit for excluding inquests from the bill, an element of the original draft that had provoked strong opposition from armed forces families and the British Legion.

But senior Liberal Democrats have not all been persuaded and will express their concern about the bill at their conference in Brighton this month. A motion says the bill's proposals for "closed material procedures", as they are called, form no part either of the Liberal Democrat or Conservative manifestos in 2010, or the coalition agreement.

The UK Banking Fraud

Libor scandal: gunfight on Threadneedle Street

This is not just some common or garden mishap or even misbehaviour at a big business. This is 'fraud'

• Editorial
• guardian.co.uk, Tuesday 17 July 2012 20.50 BST

Only two weeks into the market-rigging scandal and already the economic-policy establishment resembles the final scene of Reservoir Dogs: a bunch of men in suits all blindly shooting at each other.

Former Barclays boss Bob Diamond has landed the Bank of England's Paul Tucker in deep trouble, with a note implying that he encouraged the misreporting of money-market rates. Barclays' ex-chief operating officer Jerry del Missier told MPs this week that Mr Diamond ordered him to fiddle Libor rates. And Barclays was accused by theFinancial Services Authority (FSA) on Monday of a "culture of gaming – and gaming us". The FSA has been dumped in it by Mervyn King, who argued on Tuesday that it was not the Bank's job to regulate Libor – the implication being that it was the FSA's fault. Both the FSA and the Bank agree that prime responsibility for monitoring Libor lay with the British Bankers' Association. And then there is George Osborne, whose main contribution to the chaos has been to suggest to a magazine interviewer that Gordon Brown and his lieutenants are somehow to blame.

This is the British economic-policy establishment under unprecedented pressure – and what an unseemly, blame-ducking, buck-passing panic it presents. Not just the humbling of some of our most senior and respected officials but also the erraticism with which they have been making policy. Take, for instance, the ousting of Bob Diamond. The FSA's Adair Turner told MPs this week that when he spoke to the Barclays chairman Marcus Agius after the Libor scandal, he had expected Mr Diamond to walk the plank. Something was obviously lost in translation, however, because Mr Agius stood down instead. It took the intercession of Mervyn King to force out the Barclays chief executive. And why exactly was Mr Diamond pushed out? Not for any direct involvement in the Libor scandal but, in the words of Mr King yesterday: "They [the bank] have been sailing too close to the wind across a wide number of areas." No actual infraction; just a general sense of having gone too far for too long. This raises the question of why no regulator seriously intervened in Barclays before the Libor scandal. Bob Diamond has been head of one of Britain's biggest banks since January 2011, yet no official has brought up a previous incident where they told the board to change their behaviour or their personnel. The impression left is of rather rough justice. As Andrew Tyrie, head of the Treasury select committee, drily observed in the same session, by that measure every chief executive in the land is "only a couple of bad dinners" away from being forced out of a post.

This is not just some common or garden mishap or even misbehaviour at a big business. As Mr King observed on Tuesday, this is "fraud". And it has not just been carried out by Barclays, but by a string of other financial institutions – who between them fiddled the benchmark interest rates that are used as reference for hundreds of billions of pounds' worth of transactions. Some of the commentary about this scandal has brought up the fact that this occurred during the credit crunch in 2008, when it would apparently have been in everyone's interests to pretend that all was normal in money markets. Maybe, except that this scamming took place over at least four years – and the kindest interpretation of the evidence to date is that officials asked barely any questions. In place of supervision there was what looks like worrying chumminess. "Well done, man. I am really, really proud of you," Mr Diamond emailed the number two at the Bank on his promotion in December 2008. Mr Tucker replied: "You've been an absolute brick."

This story has so far revolved around one bank rigging one set of interest rates, involving emails and letters and committee hearings. Imagine what a serious, wide-ranging inquiry could uncover. Britain certainly needs one, because this blossoming scandal threatens not just the reputation of an industry but the regulators and ministers who let it run riot.

Was the Petrol Price rigged too?

By Rowena Mason, Emma Rowley in The Telegraph

9:00PM BST 15 Jul 2012

Concerns are growing about the reliability of oil prices, after a report for the G20 found the market is wide open to “manipulation or distortion”.

Traders from banks, oil companies or hedge funds have an “incentive” to distort the market and are likely to try to report false prices, it said.

Politicians and fuel campaigners last night urged the Government to expand its inquiry into the Libor scandal to see whether oil prices have also been falsely pushed up.

They warned any efforts to rig the oil price would affect how much drivers pay at the pump, which soared to a record high of 137p per litre of unleaded earlier this year.

Robert Halfon, who led a group of 100 MPs calling for lower fuel prices, said the matter “needs to be looked at by the Bank of England urgently”

“We need to know whether the oil price has been manipulated in a similar way to Libor,” the MP for Harlow said. “This impacts on millions of people all round the country concerned about the price of petrol at the pumps.”

Petrol retailers use oil price “benchmarks” to decide how much to pay for future supplies.

The rate is calculated by data companies based on submissions from firms which trade oil on a daily basis – such as banks, hedge funds and energy companies.

However, like Libor – the interest rate measure that Barclays was earlier this month found to have rigged – the market is unregulated and relies on the honesty of the firms to submit accurate data about all their trades.

This is one of the major concerns raised in the G20 report, published last month by the International Organisation of Securities Commissions (IOSCO).

In the study for global finance ministers, including George Osborne, the regulator warns that traders have opportunities to influence oil prices for their own profit.

It points out that the whole market is “voluntary”, meaning banks and energy companies can choose which trades to make public.

IOSCO says this “creates opportunity for a trader to submit a partial picture in order to influence the [price] to the trader’s advantage”.

In an earlier report, the regulator concluded: “It is open to companies to report only those deals that are in their own best interests for the rest of the market to see.”

The price reporting agencies, Platts and Argus, argue they employ journalists to weed out false data submitted by oil traders.

IOSCO says reporters are “well-aware that traders have an incentive to push the market one way or another and do not generally believe everything they are told”.

However it points out this system is heavily reliant on the “experience and training” of journalists to make a judgement about what the oil price should be.

Further alarm bells are being sounded by US regulators, who have already pointed out the rate-rigging scandal could spread to the oil market.

Scott O’Malia, a top official at the US Commodities Futures Commission, has drawn attention to the “striking similarity” between the potential for manipulating oil and Libor.

British regulators carrying out the Wheatley Review into the Libor scandal have this week signalled they will look into whether other markets were skewed.

Paul Tucker, the Bank of England’s deputy governor, told MPs that Barclays’ abuse of the Libor system may be only one part of the banks’ dishonesty over crucial financial information.

Politicians last night called on the Bank of England and the Government to take heed of IOSCO’S finding about the oil market to prevent another crisis of confidence in the banks.

Lord Oakeshott, the former Liberal Democrat Treasury spokesman, said the oil price system ought to be examined in the wake of the Libor scandal.

“Clearly it’s right we must shine a light on how other crucial benchmark prices are reported, especially when they affect the cost of living for millions of motorists,” he said.

Brian Madderson, chairman of the Petrol Retailers’ Association, also called for an investigation into the “alarming” conclusions of the G20 report.

“All the petrol retailers buy their products based on Platts prices,” he said. “If IOSCO thinks the price is open to manipulation it could well be and that would affect prices on the forecourts.”

Banks are also calling for reform of the oil price system, amid fears that it is open to abuse by a minority of traders.

Simon Lewis, chief executive of the Global Financial Markets Association, has raised concerns about the “opaque” way the oil price is worked out.

In a letter to IOSCO, he said price reporting agencies may not be as impartial as they claim, because they take fees from banks and oil companies to provide information.

“Incentives may arise to favour those who pay greater subscriber fees or provide greater access to market information,” he said.

Some experts, such as Raymond Learsy, a former commodities trader and author of Oil and Finance, have been warning for years that the oil market is open to corruption.

“Given how important Libor is, if that can be manipulated, then why can’t oil be manipulated?” he said. “The price lends itself to manipulation. The oil price is not a true reflection of supply and demand.”

The reporting agencies have hit back at claims their prices are open to distortion. In a joint statement, Platts and Argus said there are “fundamental differences” in the way Libor and oil prices are reported.

“Independent price reporting organisations are independent of and have no vested interest in the oil and energy markets,” they said. “Their ownership is transparent, and strict internal governance separates editorial and commercial functions. Independent price reporting organisations are not market participants, nor providers of transaction execution, clearing or settlement services.”

Platts added that there are four main differences between oil prices and Libor – the quality of its data, its independence, competition between reporting agencies and the transparency of its methodology.

Bank of England says Libor scandal may be going on in other markets too

The market for determining one of the world’s key interest rates was a “cesspit” and banks cannot be trusted to be honest in several other major markets, the deputy governor of the Bank of England has warned.

By James Kirkup, and Angela Monaghan in The Telegraph

7:51PM BST 09 Jul 2012 

Paul Tucker told MPs that Barclays’ abuse of the Libor system may be only one part of the banks’ dishonesty over crucial financial information, suggesting that other markets should now be investigated.

An official inquiry into Libor – which helps determine interest rates for householders and businesses – should be broadened to include several over markets where banks are trusted to report their own data, he said.

Mr Tucker’s evidence to the Treasury Select Committee also reignited the political row over the Libor scandal as he insisted that members of the last Labour government had not “absolutely not” put pressure on him to reduce Libor.

George Osborne, the Chancellor, has said that that the last government was “clearly involved” in the banks’ dishonest under-stating of the interest rates they were paying to borrow on money markets.

Labour last night demanded Mr Osborne withdraw his claims, but Treasury sources insisted that question remain about Labour’s direct dealings with dishonest banks during the 2007-08 financial crisis.

Barclays has been fined almost £300 million for deliberately lying about the rates it was paying during the financial crisis, in order to downplay the financial pressure it was under.

Other banks are also being investigated for distorting Libor, which is calculated on major banks’ own reports of their borrowing costs.

Mr Tucker said he could not be sure that abuse of the Libor system is not continuing to this day, telling the committee: “I can't be confident of anything after learning of this cesspit.”

The Libor scandal could be repeated in a number of other “self-certifying” markets where prices are determined, he said.

“Self-certification is clearly open to abuse, so this could occur elsewhere,” he said.

A Financial Services Authority inquiry into Libor should be extended to other self-certifying markets, he said. The Treasury said last night that the review, led by Martin Wheatley, was free to examine markets other than Libor.

An expansion of the FSA review could take in a number of other interest-rate-related data as well as some complex financial instruments measuring the difference between banks’ borrowing costs and that of the US government. Some markets in gold and oil are also based on self-certification.

Mr Tucker faced intense questions from the MPs about why the Bank had not acted on abuse of Libor earlier and had not apparently been aware of abuses until a few weeks ago.

He admitted that the Bank had been concerned about the integrity of the Libor process during the financial crisis, but did not suspect deliberate wrongdoing. “We thought it was a malfunctioning market, not a dishonest market,” he said.

The Bank had opened the door to changing the way Libor was calculated in 2008, but did not act because of the turmoil in the global financial system, he said.

“We made a judgement that moving away from the existing method of self-certification was just not feasible during a financial crisis”.

Banking keeps getting away with it, just as the unions did

Heads will probably roll for the Libor scandal, but this crisis won't end until the profession's link with politicians is severed

• 
• • Simon Jenkins
  • guardian.co.uk, Thursday 28 June 2012 20.30 BST

Banking first refused regulation and now welcomes it, because only thus can it be protected from the consequences of its own greed. Illustration: Simon Pemberton

 

Too big to fail … now too big to jail? There seems no end to the immunity – moral, political, fiscal and possibly legal – claimed by the present masters of the universe, the bankers. In a side-splitting, coffee-spluttering radio interview today, Sir Martin Taylor, the former chief executive of Barclays, mused that his old board might consider the best person to "turn the page" on the bank's latest scandal might be none other than its author and present chief executive, Bob Diamond. That is presumably despite the bank being fined £290m and pending possible charges of fraud.

Diamond has "taken responsibility" for the division that from 2005 onwards manipulated inter-bank loans so as to disguise the bank's vulnerability in the runup to the 2008 credit crunch. The clear intention was to mislead the market and enrich bank staff with bonuses. Responsibility apparently means Diamond "giving up" a bonus which, surely, he has yet to earn.

A year ago the Barclays chief dazzled the BBC into letting him give a lecture on banking and citizenship, a lecture now sodden with irony. He spoke of the importance of an organisation's culture, of "how people behave when no one is watching", and how "our culture must be one where the interests of customers and clients are at the very heart of every decision we make". Bankers must be good citizens, said Diamond,, or there would be social unrest.

At the time Diamond was demanding his own shareholders pay him not just a salary, but the tax on that salary and then the tax on that taxable benefit. It is not clear who paid the tax in this spiral of greed. Diamond must also have known his colleagues were then being investigated by the Financial Services Authority for irregularities in the bank's trading. Diamond's entire reputation was built on his banking culture, one of bonus-hunting, offshore tax avoidance and killer-takes-all rivalry. For him to give a lecture on ethics invited cliches about Jack the Ripper and door-to-door salesmanship.
The Barclays affair should be a sideshow to our present discontents. The world currently faces the greatest collapse in western statecraft since the second world war. Economists, officials, politicians, even commentators, seem gripped by professional and intellectual rigor mortis, one horribly reminiscent of the 1930s. All experience tells them that a collapse in global demand needs monetary injection, not contraction. Yet they deny it, and bankers lie about it. In Britain we all parrot that £325bn has been "pumped into the economy" by the Bank of England. It has not. The money is nowhere to be seen. It is a device, a headline, a sick joke.

At such times it is comforting to turn from the murky failures of the present to the clear ones of the past. The snoozing Commons Treasury committee is yet again "to call Mr Diamond the account", so it can show off its interrogatory machismo. Lord Myners, formerly of the Guardian, won himself plaudits today by calling Barclays "the most corrosive failure of moral behaviour that I have seen in a major financial institution". But he was a worldly banker himself, and City minister in 2008-9, when the whole house of cards was collapsing amid media reports of "something fishy" in the Libor market. Labour was putty in the hands of the bankers.

From the credit crisis to the present day, the one profession with open access to Downing Street is banking. It lobbies successfully on everything from bailouts to bonuses, non-doms to Tobin taxes, euro regulation to "quantitative easing". When told to lend to small businesses, it refuses. When given money to do so, it buries the money. When ministers plead for lower salaries, it increases them. The government takes over a bank, RBS, and its computers crash. Bankers get ribbed in the press – but so what, when the bonus is in the safe and few are ever called to account, banned from trading, or sent to jail?

Banking gets away with all this because it enjoys the same unaccounted access to power that trade unions enjoyed in the bad old days. It first refused regulation and now welcomes it, because only thus can it be protected from the consequences of its own greed. It preaches the nobility of the markets and then rigs them. We should listen every day to Adam Smith's maxim, that "people of the same trade seldom meet together … but the conversation ends in a conspiracy against the public or in some contrivance to raise prices".

Most running controversies today reflect deep confusion in corporate ethics and accountability. Barclays traders, News of the World reporters, immigration office officials, even drone bombers, turn instinctively to the excuse that they were "just obeying orders". Thus is moral responsibility dispersed and blame passed upwards to the boss, the board, the regulator, the government, ultimately democracy. The great let-out is that "we are all to blame". As the philosopher Reinhold Niebuhr remarked, moral individuals can still constitute an immoral society. Guilt is diffused in a crowd.
Failure of regulation has become a catch-all to sanitise personal and corporate misbehaviour in large organisations. This merely means that, when an outrage has been detected, and a feeding frenzy begins there are howls for heads to roll. Certainly at Barclays public decency, if nothing else, demands some sacrifice. But the real fault lies in bigness, in the ease with which corporations can fall victim to ethical compromise and pretend it is not their fault but the regulator's.

There must surely be a reckoning one day for the loss and agony that the credit crunch has inflicted – and is still inflicting – on millions of innocent victims. But as we seek out the guilty men, we should know that as long as banking retains its stranglehold on policy, the disaster will continue.