Energy Policy, Government Investigations, Oil, U.S. Senate

Global Investigations Into Oil Benchmark Price Manipulation

            In the last several weeks, the European Union’s investigation into potential manipulation of oil benchmark pricing has illuminated the global impact of activity in the energy markets and related policy development.  The EU investigation, headed by the European Commissioner for Competition, is looking into whether there has been coordinated and collusive manipulation of benchmark prices for oil that are reported by companies like Platts, a leading oil price reporting company that publishes prices based on bids and offers for oil, actual oil transactions and other information submitted by market participants daily.  The EU investigation resulted in a raid last month of several major oil companies and Platts.  Shortly after the EU raid, the Chairman of the United States Senate Energy and Natural Resources Committee urged the U.S. Department of Justice (“DOJ”) to launch an investigation of its own into whether the European activities of these oil companies is having an effect on U.S. consumers and whether manipulation of oil pricing is occurring in the United States.  The EU investigation has sparked discussion regarding the impact of daily oil transactions on global energy pricing, the jurisdictional limitations on regulators charged with oversight of the energy markets, and the tensions between a desire for increased regulation and the ultimate goals of market efficiency and transparency.

            The benchmark prices reported by Platts and other price reporting companies are tremendously influential; however, the influence that these price reporting companies have over the oil markets is not met with equal regulatory oversight over their activities.  U.S. Senator Ron Wyden articulated the importance of the benchmark prices in his letter to U.S. Attorney General Eric Holder requesting that the DOJ Financial Fraud Enforcement Task Force act upon the Presidential charge to monitor oil and natural gas markets by investigating oil benchmark price manipulation:

Traders and oil companies depend on price benchmarks set by companies like Platts, which relies on self-reporting by oil companies and others to determine the prevailing price in oil and other petroleum markets. Because world oil markets are closely connected, price and demand changes in Europe and Asia often have broad ripple effects worldwide, including in the U.S.

Companies in the industry have stated that benchmark prices reported by these price reporting companies influence anywhere from 75-95% of oil transactions or contracts for nearly 200 billion barrels of oil each year. (See, e.g., NY Times Article and Bloomberg Article).  Due to the way these oil transactions are classified, U.S. commodity regulators do not have jurisdiction over the benchmark price reporting companies.  The EU investigation is currently proceeding under the purview of antitrust law and European regulators have suggested increased regulation over price reporting companies that also will impose liability on the companies for information they report.  But, whether increased regulation is in the best interests of the market and consumers that our governments seek to protect is a question that has been posed by price reporting companies.  They argue that increased regulation will deter oil market participants from voluntarily disclosing the information that is used to determine benchmark pricing and ultimately will lead to less transparency in the market.  (See e.g., Bloomberg Article).

            In many ways, the oil price manipulation investigation has been compared to the EU investigation into manipulation of LIBOR (the London Interbank Offered Rate), which also was headed by the European Commissioner for Competition. It has been reported, however, that oil price reporting companies are emphasizing a distinction between the benchmark oil prices and LIBOR – the independent reporting companies do not have a financial interest in the benchmark oil prices that they report, whereas the banks that set LIBOR do have a financial interest in the rates that are set.  Despite any validity to such distinctions, governmental scrutiny of price setting benchmarks in the energy industry may intensify due to the magnitude of influence that benchmark pricing has on global energy markets and the void of current regulatory oversight.  As a result, companies in the industry may be subjected to invasive probes that are international in scope.  And under this pressure of global governmental scrutiny, this is an area where there is great potential for regulatory policy development in the U.S. and abroad.

Brian Heslin

About Brian Heslin

Brian Heslin represents energy companies in regulatory proceedings at the state and federal level. In addition, he provides advice on busines and strategic planning, upstream natural gas supply and capacity negotiation, compliance and other related services.


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The landscape of the energy industry is rapidly changing, with a focus on the development of clean, domestic energy sources and a secure, reliable energy infrastructure driving significant changes in the interdependency of energy industry segments and an increase in government regulation. Continued growth in the domestic production of oil and natural gas has positioned the U.S. to be an energy exporter in the global market and will have a marked impact on the course of the industry’s development.

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