Bad behaviour spreads to oil market

Plain Speaking - By Yap Leng Kuen

WHISPERS of oil price manipulation are travelling fast down the hallways of the world's oil markets.
After
a short silent spell, the oil market sprang a surprise via the double
raiding of niche trading house Argos and price fixing agency Platts.
Dutch
trading house Argos Energies, a mid-sized trading company that deals in
physical oil products and owns storage facilities, was visited by
inspectors from the European Commission last week, says Reuters, quoting a source familiar with the investigation.
The
visit occurred on the same day that authorities raided the London
bureau of Platts, and the offices of Statoil, Royal Dutch Shell and BP.
If
proven right, this could be the largest cross-border investigation
involving rates, shortly after the benchmark Libor interest rate-rigging
scandal.
Major banks have just paid hefty fines; sometimes, with
the chief executive officer or top officials of banks having to fork
out their own money to make up for the shortfalls.
Occasionally, there has been a hue and cry over oil price manipulation, but this time, the context is different.
Last week's action was the first time the European Union was taking a look at the case.
Regulators
have sharpened their teeth since major banks were caught fixing Libor
interbank rates, the rates at which banks borrow from each other.
The impact of such rigging is obvious other world interest rates are affected and so is their pricing and profit.
In
Washington, the chairman of the Senate's energy committee asked the
Justice Department to investigate whether alleged price manipulation had
boosted fuel prices for US consumers.
“Efforts to manipulate the
European oil indices, if proven, may have already impacted US consumers
and businesses, because of the inter-relationships among world oil
markets and hedging practices,” senator Ron Wyden, the chairman of the Senate Energy and Natural Resources Committee, wrote in a letter to attorney-general Eric Holder.
That letter is being reviewed by the Justice Department.
Those
found manipulating oil prices for their own profit should be severely
dealt with, as the trickle-down effects of large-scale collusion can be
very damaging.
If large countries like the United States might have already felt the impact, what about the smaller countries?
High oil prices often affect the price of transportation and manufacturing.
Prices of food and consumables increase in tandem, affecting even the basic prices for the man-in-the-street.
Bad behaviour is not just confined to some investment banks; we might be seeing it in the oil markets as well.
The impact is widespread and it is mostly the taxpayer who picks up the tab.
The price of oil has been hovering around US$100 (RM301.86) per barrel for the past two years, says Reuters. It spiked up three times to around US$120 per barrel in 2008, 2009 and 2011.
The
investigation is focused on whether there was collusion to distort
prices of crude, refined oil products and ethanol traded during the
market-on-close window.
Platts, a unit of McGraw-Hill, provides clients with price benchmarks set by reporters for opaque energy markets, according to Reuters.
Its assessments are used to close physical and derivative deals worth billions in a US$2.5 trillion market.
,LI> Columnist Yap Leng Kuen is against one group going ahead of others.