recent story in the UK Telegraph prompts concern about gasoline prices being rigged after it was discovered that Barclay's manipulated interest rates based on submitting false trade data.
Apparently, a recent study by a group for the G20 found that gasoline and crude markets are wide open to manipulation and distortion. According to the study, various traders from banks, oil companies or hedge funds have an incentive to distort the market and are likely to try to report false prices.
In reacting to the story, UK politicians and fuel campaigners last night urged the Government to expand its inquiry into the Libor scandal to see whether oil prices have also been falsely pushed up, according to the Telegraph.
Robert Halfon, who led a group of 100 MPs calling for lower fuel prices, said the matter “needs to be looked at by the Bank of England urgently”.
We need to know whether the oil price has been manipulated in a similar way to Libor,” the MP for Harlow said. “This impacts on millions of people all round the country concerned about the price of petrol at the pumps.”
Petrol retailers use oil price “benchmarks” to decide how much to pay for future supplies.
According to the Telegraph story, like LIBOR, the interest rate measure that Barclays was earlier this month found to have rigged – the market is unregulated and relies on the honesty of the firms to submit accurate data about all their trades.
This is one of the major concerns raised in the G20 report, published last month by the International Organisation of Securities Commissions.
The price reporting agencies, Platts and Argus, argue they employ journalists to weed out false data submitted by oil traders.
IOSCO says reporters are “well-aware that traders have an incentive to push the market one way or another and do not generally believe everything they are told”.
However it points out this system is heavily reliant on the “experience and training” of journalists to make a judgement about what the oil price should be.
Further alarm bells are being sounded by US regulators, who have already pointed out the rate-rigging scandal could spread to the oil market.
Scott O’Malia, a top official at the US Commodities Futures Commission, has drawn attention to the “striking similarity” between the potential for manipulating oil and Libor. Read more of the
Telegraph story here.