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Shell: oil market regulation will cost consumers

May 19th, 2013
by John Donovan.

 

Royal Dutch Shell lobbied against proposed European rules designed to clamp down on commodity market abuse, arguing they would raise costs for consumers and increase market volatility.

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Shell argued strongly against elements of EC reforms to “strengthen the fight against market abuse across commodity and related derivative markets”.

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Emily Gosden By 10:00PM BST 18 May 2013

The oil giant was last week raided by European Commission investigators over suspicions it could have colluded with BP and others to rig the oil price for more than a decade by reporting distorted prices to a price reporting agency (PRA).

The investigation has reignited the broader debate around regulation of trading in commodities such as oil and gas, which affect prices paid by consumers.

European Union politicians are considering EC plans to “strengthen the fight against market abuse across commodity and related derivative markets” and to revise the Markets in Financial Instruments Directive (MiFID II) to “enhance the transparency and oversight of derivatives markets including commodity markets”.

Documents obtained by the Sunday Telegraph show Shell argued strongly against elements of both reforms, which relate to general market rules and not to the function of PRAs.

In a presentation to industry and EU officials as the rules were being debated in September, Shell argued for MiFID II to be revised as “physical [commodity] trades should remain out of financial regulation”, warning that proposals to subject them to the same rules would “add considerable costs leading to higher bills for consumers”.

The latest version of the proposal now excludes physical commodity trades from the regulation.

Shell also argued against the draft market abuse proposals to stop insider dealing, arguing they would require it to disclose too much information about, for example, refinery breakdowns, leading to “price spikes”, greater volatility and “higher bills for consumers”.

The presentation also made clear that Shell supported an increased “appropriate transparency”.

Seth Freedman, the former ICIS Heren price reporter who blew the whistle on alleged gas price rigging, said: “It is vital that MiFID II and related regulations are applied stringently to energy markets.”

Shell declined to comment.

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Posted in: BP, Business Principles, Corporate Governance, Daily Telegraph, Oil, Oil Prices, Royal Dutch Shell Plc.
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