Royal Dutch Shell Plc , BP Plc and Statoil ASA Being Probed for Price Fixing (Updated May 16)

According to Royal Dutch Shell, BP, Statoil – three of Europes biggest oil producers, and Platts – the oil-price data collector owned by McGaw Hill Financials Inc., they are being investigated by the European antitrust regulators about potential manipulation of prices. The probe aims at the lack of transparency in the pricing of financial products such as stocks and U.S. corporate bonds in some energy markets. It marks the third time a global pricing benchmark draws the attention of regulators, following investigations into Libor last year and ISDAFix, the benchmark for the swaps market.

According to Statoil the drawn attention is about the prices published by Platts. The company publishes benchmark prices, which determine the price refiners pay for crude oil and the distribution prices for diesel and gasoline. Those benchmark prices are based on the reported transactions by the traders, which in contrast with the NYSE is not transparent at all. The European Commission said in a statement: ““The commission has concerns that the 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.”

According to Total SA – Europes third biggest oil company, reference prices, such as those published by Platts, are a base for 80% of all crude and oil product transactions. By Total SA estimates, Platts represents 95% of crude transactions, 90% of oil products and OTC derivative transactions. And since oil prices influence almost every other price in an economy, it is clear how important transparency in this case is.

Update (May 16) Platts has most of the traders support amid the European Commissions probe into benchmark price manipulations. According to a survey conducted by Bloomberg, 34 out of 55 traders, analysts and brokers confirm that the pricing system, which Platts, a division of McGraw Hill Financial Inc., is the best way of pricing the crude and refined products market, which amounts to $3,4 trillion a year. Stephen Schork, president of Schork Group Inc., a consultant in Villanova, Pennsylvania said: “Blaming Platts is akin to shooting the messenger.Given the quantity of oil being traded in hundreds of different markets around the globe, the price assessments are a fast, reliable method to broadcast information to the general market in a timely fashion.”