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Report: are petrol prices being fixed?
A report from the G20 has found that the market for oil prices is open to “manipulation or distortion”, leading to concern that motorists may have been paying too much for petrol.
According to the Telegraph there are growing fears that banks and other traders may have tried to artificially alter oil pricing in a similar manner to the LIBOR interest rate scandal that’s currently under investigation by the Bank of England.
The International Organisation of Securities Commissions prepared the G20 report for world finance ministers, including UK Chancellor George Osborne. It suggests that due to way oil trade prices are reported, it would potentially be possible for traders to influence values – which would in turn impact on how much people are paying for fuel on filling station forecourts.
Not only is the entire system of price reporting “voluntary” – allowing banks, energy companies and other traders to choose which trades they make public – the possibilities for private economic gain due to false reporting effectively creates an “incentive” to carry out such attempted distortion.
MP for Harlow, Robert Halfon, who leads a group of 100 MPs calling for lower fuel prices, said in the Telegraph that the matter: “needs to be looked at by the Bank of England urgently.”
He continued: “We need to know whether the oil price has been manipulated in a similar way to LIBOR. This impacts on millions of people all round the country concerned about the price of petrol at the pumps.”
Halfon’s concerns are echoed by other politicians, US regulators, the Petrol Retailers’ Association and various experts in the field. Including chief executive of the Global Financial Markets Association Simon Lewis, who has suggested that oil price reporting agencies may lack impartiality, due to the fees they receive from banks and oil companies for information.
Others, such as Raymond Learsy, author of ‘Oil and Finance’, are asking: if LIBOR can be rigged, then what’s to stop the same thing happening with oil prices? “The oil price is not a true reflection of supply and demand,” he said to the Telegraph.
However, oil price reporting agencies Platts, Argus Media and ICIS have hit back at such claims, by pointing out that the system employed here has “fundamental differences” to that supposedly regulating the also voluntary LIBOR interest rate measure (which Barclays was found to have manipulated earlier this month).
In a joint statement, they explained that they are “independent of and have no vested interest in the oil and energy markets”.
Data quality, competition between agencies and transparent methodology as well as independence are all said to create significant differences between oil pricing and LIBOR. They also employ journalists to specifically spot any attempt at artificial distortion in the figures reported to them.
Convincing? We’ll have to wait and see. As yet neither the Bank of England nor the British Government has confirmed the intention to investigate further.
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