FTC opens fuel-pricing probe after EU begins theirs

The U.S Federal Trade Commission (FTC) has followed the European Union in opening a formal probe into how crude oil and refined petroleum product prices are set, according to Bloomberg News. It said the investigation was in a preliminary stage, but would likely broaden.
The FTC is currently reviewing the progress made by the European authorities, Bloomberg reported, citing two people familiar with the matter.
The agency has conducted several inquiries into U.S. oil prices over the past few years and is often called on to investigate possible price-fixing when prices surge. But the agency has generally found that market forces such as China’s growing demand or a refinery shutdown are to blame.
Those investigations have also typically been focused on market forces rather than the mechanics of setting benchmark prices, a process that is under increased scrutiny following revelations that some of the world’s biggest banks have been rigging the Libor interest rate benchmark.
The probe comes more than a month after European authorities raided the offices of Royal Dutch Shell Plc, BP Plc, and Statoil ASA to investigate suspected price manipulation. They also visited price publisher Platts, a unit of McGraw-Hill Financial, Inc., the daily price assessments of which are widely used as a benchmark in oil markets.
Platts has not been contacted by the FTC, but is ready to “fully co-operate” with regulators to ensure the oil market functions effectively, said spokeswoman Kathleen Tanzy. News that Washington has taken up the investigation might come as little surprise given growing trans-Atlantic inquiries and the sharp global focus on financial benchmarks.
The fact that the FTC, not the Justice Department, is leading the inquiry suggests any charges that result might not be criminal in nature, Bloomberg reported.
Platts’ oil prices are widely used in the United States as benchmarks for long-term contracts or derivative trades, and are generally set using a market-on-close system similar to Europe’s, during which a series of bids, offers and trades in a half-hour period are used to establish prevailing prices.
Other independently owned price reporting agencies (PRAs), including Argus and OPIS, are also used as benchmarks in certain markets. Platts is in the process of implementing a set of proposals put forward by an International Organization of Securities Commissions study that laid out recommended best practices for PRAs, and will have those verified by an external auditor by October, Tanzy said.
(June 25, 2013)