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May 14th, 2013:

BP and Shell raided after allegations they colluded to rig oil prices

May 14th, 2013
by Editor.
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BP and Shell raided after allegations they colluded to rig oil prices

The Guardian

– ‎45 minutes ago‎

The London offices of BP and Shell have been raided by European regulators investigating allegations they have “colluded” to rig oil prices for more than a decade

BP and Shell raided after allegations they colluded to rig oil prices

European commission carries out ‘unannounced inspections’ to investigate claims prices were rigged for more than a decade

The suspected violations – related to the Platts’ price assessment process – may have been going on since 2002. Photograph: Eric Piermont/AFP/Getty Images

The London offices of BP and Shell have been raided by European regulators investigating allegations they have “colluded” to rig oil prices for more than a decade.

The European commission said its officers carried out “unannounced inspections” at several oil companies in London, the Netherlands and Norway to investigate claims they may have “colluded in reporting distorted prices to a price reporting agency [PRA] to manipulate the published prices for a number of oil and biofuel products”.

The commission said the alleged price collusion, which may have been going on since 2002, could have had a “huge impact” on the price of petrol at the pumps “potentially harming final consumers”.

Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was “as serious as rigging Libor” – which led to banks being fined hundreds of millions of pounds.

He demanded to know why the UK authorities had not taken action earlier and said he would ask questions of the British regulator in Parliament. “Why have we had to wait for Brussels to find out if British oil giants are ripping off British consumers?” he said. “The price of energy ripples right through our economy and really matters to every business and families.”

RAC technical director David Bizley said the allegations were “worrying news for motorists” who are already suffering due to the high cost of keeping a vehicle.

“Motorists will be very interested to see what comes of these raids. Whatever happens the RAC will continue to campaign for greater transparency in the UK fuel market and for a further reduction in fuel duty to stimulate economic growth.”

Four months ago the Office of Fair Trading (OFT) ruled out an investigation into petrol price fixing after finding “very limited evidence” that pump prices rise quickly when the wholesale price goes up but fall more slowly when it drops.

The European authorities declined to name any of the companies raided but BP, Shell, Norway’s Statoil and Platts, the world’s leading oil price reporting agency, all confirmed they are being investigated.

In a statement Shell said: “We can confirm that Shell companies are currently assisting the European commission in an inquiry into trading activities.”

BP said: “BP is one of the companies that is subject to an investigation that was announced by the European commission. We are co-operating fully with the investigation and unable to comment further at this time.”

Statoil, which is 67%-owned by the Norwegian government, said: “The authorities suspect participation by several companies, including Statoil, in anti-competitive agreements and/or concerted practices contrary to Article 53 of the European Economic Area (EEA) [market manipulation].

“The suspected violations are related to the Platts‘ Market-On-Close (MOC) price assessment process, used to report prices in particular for crude oil, refined oil products and biofuels, and may have been ongoing since 2002.”

Platts said the investigators had “undertaken a review at its premises in London this morning in relation to the Platts price-assessment process”.

The EC said the big oil companies may have “prevented others from participating in the price assessment process, with a view to distorting published prices”.

“Any such behaviour, if established, may amount to violations of European antitrust rules that prohibit cartels and restrictive business practices and abuses of a dominant market position.

It warned: “Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers.”

Luke Bosdet of the AA said British motorists would be relieved that the “lid is finally being lifted off the dark and murky world of oil pricing”.

“Because prices are set in secret, drivers and consumers have no idea whether or not the price they pay at the pumps is a fair reflection of the wholesale price.”

Shadow energy and climate change secretary Caroline Flint said: “These are very concerning reports, which if true, suggest shocking behaviour in the oil market that should be dealt with strongly.

“When the allegations of price fixing in the gas market were made, Labour warned that opaque over-the-counter deals and relying on price reporting agencies left the market vulnerable to abuse.

“These latest allegations of price fixing in the oil market raise very similar questions. Consumers need to know that the prices they pay for their energy or petrol are fair, transparent and not being manipulated by traders.”

Shadow financial secretary to the Treasury Chris Leslie said: “If oil price fixing has taken place it would be a shocking scandal for our financial markets.

“Labour tabled amendments in Parliament last year calling for commodities like oil to be part of the Financial Conduct Authority’s regulatory net, but Ministers refused to act. They should explain why they complacently failed to do so.”

The raids come six months after the Guardian revealed claims of a gas trading scam that led to investigations by the energy regulator, Ofgem, and the Financial Services Authority (now the Financial Conduct Authority) which is ongoing.

The inquiry by Brussels also comes at a time when the price-reporting agencies are under wider scrutiny and have been told by Iosco, the umbrella group of financial regulators, to tighten up the way they work.

There has been deep unease since the Libor scandal that traded commodities such as oil and gas have become increasingly important as investments and yet many of the transactions are not going through exchanges where prices can be checked and transparency for investors assured.

Mounting concern that energy trading had become an area of potential market abuse was highlighted in a feature in the Financial Times last week. This triggered a response from Platts.

In a letter to the FT this week, Larry Neal, the president of Platts, said: “Your comparison of PRA activity to Libor is a false one … While PRAs do obtain information from ‘traders who may have a vested interest in moving the markets, the agencies do not have any such vested interest. In contrast, our role is providing market transparency.”

Last week the Guardian reported that some major energy companies, plus banks and trading houses have stopped providing information to the PRAs whose indices have underpinned the wholesale and in turn the retail gas market.

Officials at Statoil, were among those who said that they had ceased co-operating with three PRAs – Platts, Argus and Icis Heren.

Before Christmas, the French oil group Total said in a letter to Iosco: “Sometimes the criteria imposed by PRAs do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer.”

Why the world faces climate chaos

May 14th, 2013
by Editor.
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http://www.ft.com/intl/cms/s/0/c926f6e8-bbf9-11e2-a4b4-00144feab7de.html

May 14, 2013 7:15 pm

Why the world faces climate chaos

Martin WolfBy Martin Wolf

We will watch the rise in greenhouse gases until it is too late to do anything about it

Last week the concentration of carbon dioxide in the atmosphere was reported to have passed 400 parts per million for the first time in 4.5m years. It is also continuing to rise at a rate of about 2 parts per million every year. On the present course, it could be 800 parts per million by the end of the century. Thus, all the discussions of mitigating the risks of catastrophic climate change have turned out to be empty words.

Collectively, humanity has yawned and decided to let the dangers mount. Professor Sir Brian Hoskins, director of the Grantham Institute for Climate Change at Imperial College in London, notes that when the concentrations were last this high, “the world was warmer on average by three or four degrees Celsius than it is today. There was no permanent ice sheet on Greenland, sea levels were much higher, and the world was a very different place, although not all of these differences may be directly related to CO2 levels.”

His caveat is proper. Nonetheless, the greenhouse effect is basic science: it is why the earth has a more pleasant climate than the moon. CO2 is a known greenhouse gas. There are positive feedback effects from rising temperatures, via, for example, the quantity of water vapour in the atmosphere. In brief, humanity is conducting a huge, uncontrolled and almost certainly irreversible climate experiment with the only home it is likely to have. Moreover, if one judges by the basic science and the opinions of the vast majority of qualified scientists, risk of calamitous change is large.

What makes the inaction more remarkable is that we have been hearing so much hysteria about the dire consequences of piling up a big burden of public debt on our children and grandchildren. But all that is being bequeathed is financial claims of some people on other people. If the worst comes to the worst, a default will occur. Some people will be unhappy. But life will go on. Bequeathing a planet in climatic chaos is a rather bigger concern. There is nowhere else for people to go and no way to reset the planet’s climate system. If we are to take a prudential view of public finances, we should surely take a prudential view of something irreversible and much costlier.

So why are we behaving like this?

The first and deepest reason is that, as the civilisation of ancient Rome was built on slaves, ours is built on fossil fuels. What happened in the beginning of the 19th century was not an “industrial revolution” but an “energy revolution”. Putting carbon into the atmosphere is what we do. As I have argued in Climate Policy, what used to be the energy-intensive lifestyle of today’s high-income countries has gone global. Economic convergence between emerging and high-income countries is increasing demand for energy faster than improved energy efficiency is reducing it. Not only aggregate CO2 emissions but even emissions per head are rising. The latter is partly driven by China’s reliance on coal-powered electricity generation. (See charts.)

A second reason is opposition to any interventions in the free market. Some of this, no doubt, is driven by narrowly economic interests. But do not underestimate the power of ideas. To admit that a free economy generates a vast global external cost is to admit that the large-scale government regulation so often proposed by hated environmentalists is justified. For many libertarians or classical liberals, the very idea is unsupportable. It is far easier to deny the relevance of the science.

A symptom of this is clutching at straws. It is noted, for example, that average global temperatures have not risen recently, though they are far higher than a century ago. Yet periods of falling temperature within a rising trend have occurred before.

A third reason may be the pressure of responding to immediate crises that has consumed almost all the attention of policy makers in the high-income countries since 2007.

A fourth is a touching confidence that, should the worst comes to the worst, human ingenuity will find some clever ways of managing the worst results of climate change.

A fifth is the complexity of reaching effective and enforceable global agreements on the control of emissions among so many countries. Not surprisingly, the actual agreements reached give more an appearance of action than a reality.

A sixth is indifference to the interests of people to be born in a relatively distant future. As the old line goes: “Why should I care about future generations? What have they ever done for me?”

A final (and related) reason is the need to strike a just balance between poor countries and rich ones and between those who emitted most of the greenhouse gases in the past and those who will emit in the future.

The more one thinks about the challenge, the more impossible it is to envisage effective action. We will, instead, watch the rise in global concentrations of greenhouse gases. If it turns out to lead to a disaster, it will by then be far too late to do anything much about it.

So what might shift such a course? My view is, increasingly, that there is no point in making moral demands. People will not do something on this scale because they care about others, even including their own more remote descendants. They mostly care rather too much about themselves for that.

Most people believe today that a low-carbon economy would be one of universal privation. They will never accept such a situation. This is true both of the people of high-income countries, who want to retain what they have, and the people of the rest of the world, who want to enjoy what the people of high-income countries now have. A necessary, albeit not sufficient condition, then, is a politically sellable vision of a prosperous low-carbon economy. That is not what people now see. Substantial resources must be invested in the technologies that would credibly deliver such a future.

Yet that is not all. If such an opportunity does appear more credible, institutions must also be developed that can deliver it.

Neither the technological nor the institutional conditions exist at present. In their absence, there is no political will to do anything real about the process driving our experiment with the climate. Yes, there is talk and wringing of hands. But there is, predictably, no effective action. If that is to change, we must start by offering humanity a far better future. Fear of distant horror is not enough.

martin.wolf@ft.com

http://www.ft.com/m/html/expandable-picture.htm

http://www.ft.com/m/html/expandable-picture.htm