Oil Probe That EU Says Mirrors Libor May Reveal Huge Damage

Oil-price manipulation may have wrought “huge” damage to consumers, the European Union’s antitrust chief said today, as he drew comparisons with EU investigations into rigging of bank rates including Libor.

While it’s too soon to draw conclusions from the May 14 raids on Royal Dutch Shell Plc, BP Plc, Statoil ASA and Platts, EU Competition Commissioner Joaquin Almunia said both sets of probe target price manipulation through a reporting system.

EU antitrust regulators arrived unannounced at Platts as well as at oil companies in its investigation into possible collusion by traders. Platts, whose U.K. operations at Canary Wharf are in the same building as BP offices, provided data and is cooperating with the inquiry. It continues to publish benchmark prices including North Sea Dated Brent, against which more than half the world’s crude is valued.

“We are still in the first steps of the procedure,” Almunia said. “If de facto the manipulation is confirmed,” it would have led to “huge” damage to consumers, he said.

The three oil companies have all said they are cooperating with the commission. Speaking two days after the antitrust raids, Statoil Chief Executive Officer Helge Lund said the company has “zero tolerance” for breaches of the rules. Shell is committed to the “highest standard of corporate behavior,” CEO Peter Voser said May 21.

The EU oil probe, which extends to undisclosed crude-derived products and biofuels, underscores how pricing in some energy markets lacks the transparency of financial products such as stocks and U.S. corporate bonds. It also marks the third time global pricing benchmarks have drawn the regulators’ scrutiny in the past year following investigations into bank manipulation of the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market.

Financial Sector

“To some extent this problem has similarities with the benchmarks in the financial sector and with the investigations we are carrying out on Libor, Euribor and Tibor cases,” Almunia said, referring to EU probes into those financial benchmarks.

“In these investigations -- as in the Libor and Euribor cases -- our goal is to make sure that the companies have not colluded to manipulate their prices through a reporting system,” he said.

The EU’s investigations into benchmarks are running alongside ones by U.S. and U.K. regulators who uncovered widespread attempts by banks to manipulate Libor. Royal Bank of Scotland Group Plc, UBS AG, and Barclays Plc have been fined about $2.5 billion and at least a dozen firms remain under investigation.

‘Millions’ Hit

Almunia’s comments on the possible magnitude of the oil market rigging follow those of his top aide, Alexander Italianer, who said last week “millions of Europeans” could have been affected by the behavior under investigation.

“Our goal here is to make sure that these companies have not colluded to manipulate the prices for oil and biofuel products or prevented other companies from participating in the price-assessment process,” Italianer said at a speech in Dublin on May 24.

Platts, a unit of New York-based McGraw Hill Financial Inc., provides benchmark assessments on physical markets, using data on actual trades and its own editorial judgment. Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy markets news and information.

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