European oil price probe widens; U.S. senator calls for Justice help

May 17, 2013

A European probe into possible oil price manipulation expanded with the investigation of a small niche trading house in the Netherlands, and a key U.S. senator on Friday called for the Justice Department to join the investigation.

Dutch trading house Argos Energies, a mid-sized company that deals in physical oil products and owns storage facilities, was visited by inspectors from the European Commission on Tuesday, a source familiar with the investigation said Friday. Argos Energies declined to comment.

The visit occurred on the same day that authorities raided the London bureau of pricing agency Platts and the offices of Statoil, Royal Dutch Shell and BP.

In Washington, the chairman of the Senate energy committee asked the Justice Department to investigate whether alleged price manipulation has boosted fuel prices for U.S. consumers.

“Efforts to manipulate the European oil indices, if proven, may have already impacted U.S. consumers and businesses, because of the interrelationships among world oil markets and hedging practices,” Sen. Ron Wyden (D-Ore.), chairman of the Senate Energy and Natural Resources Committee, wrote in a letter to Attorney General Eric H. Holder Jr.

Wyden also asked Justice to investigate whether oil market manipulation was taking place in the United States.

The Commodity Futures Trading Commission and Federal Trade Commission have declined to comment on any role or coordination with E.U. authorities in the probe. U.S. politicians, including Wyden, often call for inquiries into issues that may affect gasoline prices, though regulators are not obligated to take action.

A Justice spokesman would not comment on whether the agency would undertake a probe, but said it was reviewing Wyden’s letter.

Authorities have sharpened scrutiny of financial benchmarks around the world since slapping large fines on some of the world’s biggest banks for rigging interest-rate benchmarks.

Over the past year, many observers have noted the resemblance between the Libor self-reported benchmark and the journalist assessment-based methodology used to set most of the world’s oil prices, but this week’s investigation is the first indication that E.U. authorities are taking a harder look at the system.

Hungary’s Pannonia Ethanol, a recent entrant to Europe’s market, was the first company to identify itself as having complained to Brussels over access to the Platts market-on-close (MOC) system — a daily half-hour “window” of trading during which the agency determines prices through a series of bids, offers and trades.

The investigation is focused on whether there was collusion to distort prices of crude, refined oil products and ethanol traded during the MOC window. Platts, a unit of McGraw-Hill, provides clients with price benchmarks set by reporters for opaque energy markets.

Its assessments are used to close physical and derivative deals worth billions in a $2.5 trillion market.

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