Following up on the FT Alphaville link in Tuesday's "
The Illuminati were amateurs: Oil Pricing in Europe Edition" here's Bloomberg:
Two weeks after Royal Dutch Shell Plc (RDSA) and Platts changed the way more than half of the world’s crude is valued, the companies along with BP Plc (BP/) and Statoil ASA (STL) are being probed by European antitrust regulators about potential manipulation of oil prices.
The
investigation by the European Commission shines a light on how price
reporting companies including Platts, the energy news and data provider
owned by McGraw Hill Financial Inc., help determine the cost of raw
materials used in everything from plastic bags to jet fuel. The
suspected violations are related to the Platts’ Market-On-Close assessment process, or so-called window, and may have been ongoing since 2002, Statoil said.
“The industry has developed a high degree of reliance, you can almost
call it dependence, on price reporting agencies,” said John Driscoll,
the managing director of JTD Energy Services Pte., a Singapore-based
energy advisory, and former trading manager at GS Caltex. “They have
tremendous discretionary power in their ability to interpret and publish
prices.”
Platts
has been assessing the cost of oil since at least 1923 when its
founder, Warren Platt, started Platt’s Oilgram, a daily newsletter
devoted to prices and market information. The influence of reporting
companies has grown since the mid-1980s when the industry began using
market prices instead of a system where they were set by international oil companies and the Organization of Petroleum Exporting Countries.
Underpins Trading
The
assessments made by reporting companies underpin long-term contracts,
short-term, or spot transactions, futures settlements and derivatives.
Total SA, Europe’s
third-biggest oil company, estimates as much as 80 percent of all crude
and oil product deals are linked to reference prices including those
published by Platts, while as much as 20 percent use trades on the New York Mercantile Exchange or ICE Futures Europe....MORE
As Alphaville said at the top of their post:
We suggest watching this story...
