'Limp-wristed and lettuce-like': MP attacks inquiry into BP and Shell petrol price-fixing allegations

Oil giants targeted by European Commission in probe into suspected market manipulation

A Tory MP has attacked the Office of Fair Trading inquiry into petrol prices as "limp-wristed and lettuce-like" in the wake of price-fixing allegations and has led calls for a probe.

Harlow MP Robert Halfon, who has campaigned for three years on fuel prices and allegations of oil cartels, said despite the Commons unanimously calling for a thorough probe into petrol pricing, it could be a "national scandal" if the regulator failed to spot any of the allegations currently under review.

Mr Halfon said: "Last year in this House we had a unanimous motion for a full OFT inquiry into price fixing by oil companies ... we were approached by a whistleblower who suggested the things we have seen over the past two days had been going on.

"Do you not agree that what really happened was the OFT carried out a limp-wristed, lettuce-like inquiry when they should have done a full 18-month inquiry into what has been going on?

"Do you not also agree this is, if it is proved true, a national scandal and that the Government should look at changing the law and put people in prison for fixing oil prices? This has caused misery for millions of motorists up and down the country.

"And finally, will you impose, if this is proved, very harsh penalties on all the oil companies involved and give those billions of pounds in penalties back to the motorist?"

Energy Secretary Ed Davey defended the OFT as an "independent body, a strong body", which has powers to determine its own investigations.

In a statement, a spokesman for the OFT said: "The Office of Fair Trading carried out a call for information on UK road fuels, the findings of which were published in January of this year.

"As part of this call for information, the OFT asked for evidence on whether speculation or manipulation of oil spot and futures markets or inaccurate oil or wholesale road fuel price reporting could be leading to higher pump prices.

"The OFT stated these issues could potentially raise serious concerns but no credible evidence was submitted to the OFT in response to the call for information.

The European Commission raided the offices of BP and Shell on suspicion that they are playing a central role in what could be the next price-fixing scandal – colluding to inflate oil prices and, in turn, the cost of petrol.

In the wake of the Libor interest rate and gas price manipulation scandals, the EC has launched an investigation into whether oil producers and traders are colluding to rig oil prices in a move that inflates their profits at the expense of consumers.

“The commission has concerns that companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” an EC spokesman said.

“Officials carried out unannounced inspections at the premises of several companies active in and providing services to crude oil, refined oil products and biofuels sectors,” he added.

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

The price people pay for oil, petrol and related products around the world is determined by a handful of “benchmarks”, the best known of which is Brent crude.

So-called price reporting agencies calculate the benchmark rate using data provided to them by firms such as oil companies, banks and hedge funds, which trade oil on a daily basis – submissions which the EC suspects are in some cases fraudulent.

A small increase in the price of a benchmark has a ripple effect on the prices of a wide range of products, potentially across the world analysts said.

“Benchmarks can be very influential and are used to determine all sorts of transactions. Ultimately, it effects the amount you pay for your petrol,” said Andrew Whittock, an analyst at Liberum Capital, the City broker.

BP and Shell declined to comment on whether their offices were raided – although they are known to be among a handful of players that have had “unannounced inspections”, with the Platts price reporting agency and Norwegian producer Statoil among the others. BP and Shell both conceded that they were under investigation and that they were co-operating.

The EC also said that it had concerns that some companies may have sought to increase the influence of its price inflations by “preventing others from participating in the price assessment process, with a view to distorting published prices”.

The EC’s decisive action escalated a  campaign that has been gathering momentum in recent months, after a report for the G20 last summer found that the market is wide open to “manipulation or distortion”.

The G20 report concluded that traders have an “incentive” to distort the market and are likely to try to report false prices because the market is unregulated and relies on the honesty of firms to submit accurate data about all their trades.

For its part, the UK government is also investigating the potential rigging of the oil market after concerns were raised by MPs.

It has asked the Financial Services Agency to examine whether the oil price could have been manipulated – and whether that had affected the price consumers paid at the pumps.

In addition the Bank of England is understood to have expanded its inquiry into Libor to include the oil price.

Last night the Conservative MP Robert Halfon, who has led the campaign for a formal investigation, said it was time for the oil companies to “come clean”.

“Last year Parliament voted unanimously for an investigation into the oil market,” he said.

“These latest allegations underline why that must happen. Motorists are being taken for a very expensive ride. The Government has done its bit, by freezing fuel duty for three years. Now oil companies must come clean and show some responsibility for what is happening to the international oil price.” Mr Halfon added that any company found guilty of rigging the market should face a windfall tax – with the proceeds passed onto motorists in the form of lower fuel duties.

A spokesman for the Department of Energy and Climate Change described the claims against the oil companies as “concerning”. However, he said that “until the facts are clear it would be inappropriate to comment further.”

The EC pointed out that making unannounced inspections “does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself”.

Q&A: How petrol prices were fixed

Is it actually a scandal?

No, it’s probably better characterised as a scandal-in-waiting. Following the Libor interest rate and gas-price fixing scandals, the world’s guardians have been looking for the next big rigging target – and in recent months there has been a growing consensus that the price of black gold has also been routinely manipulated.

How does it work?

It’s not actually that complicated – certainly nothing like as knotty as the Libor price-rigging. Basically, the European Commission suspects that oil companies and traders are pretending to sell oil and related products like petrol for a higher price than they really are to give the impression that it’s more valuable than it really is. In other words, they are allegedly massaging the law of supply and demand that the free market says should determine prices.

I thought you said it wasn’t complicated?

It’s not. The price people pay for oil, petrol, biofuels and related products is determined by a few “benchmark” prices – you’ve probably heard of Brent crude, that’s a benchmark. Now these benchmark prices are calculated by so-called price reporting agencies, based upon submissions from oil companies, banks, hedge funds and other players in the oil trading game. By colluding to inflate the price of their transactions, so the argument goes, they can increase the price of the benchmark and, in turn, the price of oil and oil products across the world.

So the big oil companies and their mates are lining their pockets at the expense of muggins here, who’s paying extra for his petrol?

That’s the accusation yes, although I would like to point out that nothing has been proven. Still, even if they’re completely cleared, it’ll probably leave more of a stain on the big oil companies, who have already made quite a few enemies over the years as a result of environment disasters, most notably the Gulf of Mexico oil spill that resulted in 11 deaths.

Who’s implicated?

Well, the European Commission has raided the offices of BP, Shell, Statoil of Norway and the Platts price reporting agency. It may turn out that all are innocent – alternatively it could turn out to be a huge scandal implicating a large number of traders and oil companies across the world.

What are BP and Shell saying?

Both have admitted that they are being investigated and say they are co-operating with the investigation. They won’t say whether they have been raided, although it is known that they have been.

Is there any evidence that the price has been manipulated?

None has been published, but the EC would have to be fairly concerned to launch a series of raids and make them public. Furthermore, a G20 report last year found that the unregulated oil market is wide open to “manipulation or distortion” because it is unregulated and relies on the honesty of its firms to submit accurate data about their trades.

Tom Bawden

Life and Style
Small winemakers say the restriction makes it hard to sell overseas
food + drink
Arts and Entertainment
A comedy show alumni who has gone on to be a big star, Jon Stewart
tvRival television sketch shows vie for influential alumni
Arts and Entertainment
Carrie Hope Fletcher
booksFirst video bloggers conquered YouTube. Now they want us to buy their books
News
Clare Balding
peopleClare Balding on how women's football is shaking up sport
PROMOTED VIDEO
Arts and Entertainment
Damien Hirst
artCoalition's anti-culture policy and cuts in local authority spending to blame, says academic
Sport
premier leagueMatch report: Arsenal 1 Man United 2
Arts and Entertainment
Kirk Cameron is begging his Facebook fans to give him positive reviews
film
News
i100
Sport
Jonny May scores for England
rugby unionEngland 28 Samoa 9: Wing scores twice to help England record their first win in six
Life and Style
fashionThe Christmas jumper is in fashion, but should you wear your religion on your sleeve?
News
ebooksNow available in paperback
Arts and Entertainment
Jason goes on a special mission for the queen
tvReview: Everyone loves a CGI Cyclops and the BBC's Saturday night charmer is getting epic
Arts and Entertainment
Jerry Hall (Hand out press photograph provided by jackstanley@theambassadors.com)
theatre
Sport
Tony Bellew (left) and Nathan Cleverly clash at the Echo Arena in Liverpool
boxingLate surge sees Liverpudlian move into world title contention
Voices
Neil Findlay
voicesThe vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Life and Style
food + drinkMeat-free recipes and food scandals help one growing sector
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible
Look what's mushrooming now! Meat-free recipes and food scandals help one growing sector

Look what's mushrooming now!

Meat-free recipes and food scandals help one growing sector
Neil Findlay is more a pink shrimp than a red firebrand

More a pink shrimp than a red firebrand

The vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Bill Granger recipes: Tenderstem broccoli omelette; Fried eggs with Mexican-style tomato and chilli sauce; Pan-fried cavolo nero with soft-boiled egg

Oeuf quake

Bill Granger's cracking egg recipes
Terry Venables: Wayne Rooney is roaring again and the world knows that England are back

Terry Venables column

Wayne Rooney is roaring again and the world knows that England are back
Michael Calvin: Abject leadership is allowing football’s age-old sores to fester

Abject leadership is allowing football’s age-old sores to fester

Those at the top are allowing the same issues to go unchallenged, says Michael Calvin