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Oil Price Rigging

BBC NEWS ARTICLE: Oil prices could be rigged by traders warns G20 report

COMMENT BY A REGULAR CONTRIBUTOR: “OUTSIDER”

John

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. 

New York Times: “Shell to Pay $180 Million” (Price fixing case): 3 Jan 1987

New York Times: “California Oil Price-Fixing Case Settled”: 17 August 1991

New York Times: Settlement for Coral Power: 15 November 2003

Bloomberg: Shell, Unipetrol, Bayer Are Sued Over Rubber Cartel (Update2): 20 May 2008

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.

The Times: Supermarkets and tobacco firm are fined £173m for price fixing: 12 July 2008

Reuters: EU fines “paraffin mafia” wax makers’ cartel: 1 October 2008

The Times: ‘Paraffin mafia’ comes unstuck after €676m fines: 2 October 2008

Guardian: ‘Paraffin mafia’ firms given £500m fines for price-fixing: 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

Occupational Health & Safety: Merit Energy and Shell to lower emissions after clean air violations: 4 October 2008

Financial Post (Canada): GREECE FINES BP, SHELL $80M FOR PRICE-FIXING: 26 November 2008

ChannelNewsAsia: Greece fines BP, Shell for price-fixing: 26 November 2008

International Herald Tribune: Greece: BP, Shell fined for competition breaches: 25 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

Extracts

(Reuters) – Royal Dutch Shell (RDSa.L) and Dow Chemical (DOW.N) lost a court appeal on Wednesday against a fine levied by EU regulators five years ago for taking part in a cartel…

…the Court upheld the 160.88 million euro fine on the Royal Dutch Shell group.

Shell settles South Africa cartel case: 21 February 2012

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