BBC NEWS ARTICLE: Oil prices could be rigged by traders warns G20 report
COMMENT BY A REGULAR CONTRIBUTOR: “OUTSIDER”
Following on from the LIBOR scandal, the answer to the question about whether oil prices can be rigged is almost certainly “yes”
A relatively small proportion of the world’s oil production is actively traded in Rotterdam or Cushing, and any shortage or glut of oil in these markets will cause global oil prices linked to the benchmarks to rise or fall. This has been highlighted by the recent differences between the prices of WTI and Brent. Judicious manipulation of the supply (or demand) in these markets can also result in artificially high or low oil prices.
One only needs to look at how much money the oil companies make through their “trading” activities to understand why it is important to these companies to be able to control the price of oil. It is well known that UK producers use the spot market to minimise the value of the oil they produce (which is subject to PRT) while actually selling the oil at a higher price through their trading arms, whose profits are not subject to PRT.
In addition to oil companies, governments (such as that of the USSR) have also been known to exploit this weakness in the markets to gain political and strategic, if not economic, advantage.
I’m not an economist, but I’m sure there are economists out there who might be prepared to comment!
OIL PRICE REPORT (COVER PAGE DISPLAYED)
COMMENT BY JOHN DONOVAN
With Shell, price fixing is not a matter of conjecture. The company has a disgraceful history of price fixing/cartel activity stretching back over a century, including a cartel operated with its Nazi partner, I.G. Farben, found guilty of war crimes.
Some more recent examples.
May 20 (Bloomberg) — Cooper Tire & Rubber Co., the second- largest U.S. tiremaker, and 25 other companies sued Unipetrol AS, units of Royal Dutch Shell Plc, Bayer AG, and as many as 20 others over an alleged rubber cartel in Europe.
Unipetrol and units of Shell, Dow Chemical Co., Eni SpA and Trade-Stomil Sp were fined a total of 519 million euros ($813 million) in a 2006 European Union antitrust case over material used to make tires and shoes. The companies are appealing.
Reuters: EU fines “paraffin mafia” wax makers’ cartel: 1 October 2008
The Times: ‘Paraffin mafia’ comes unstuck after €676m fines: 2 October 2008
Financial Times: Brussels fines paraffin wax cartel: 2 October 2008
The Wall Street Journal: Wax Price-Fixing Is Alleged: 2 October 2008
ChannelNewsAsia: Greece fines BP, Shell for price-fixing: 26 November 2008
Bloomberg: Chevron, Total, Exxon, Shell Fined on Air France Fuel: price fixing cartel: 4 Dec 2008 (Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron fined 41.1 million euros ($52 million) by the French antitrust authority for fixing the price of fuel for certain Air France-KLM Group flights.)
Shell, Dow lose court challenge to EU antitrust fine: 13 July 2011: Reuters
…the Court upheld the 160.88 million euro fine on the Royal Dutch Shell group.
Shell settles South Africa cartel case: 21 February 2012