Oil companies price fixing?

Frank the tank

If it's proven oil companies have illegally fixed prices for ten years. Given the hoohaa over the banks what kind of retribution/remuneration will governments,companies,business and the general public expect to get?

If true the scam will have bagged them billions at least.

ballysmate

I think it safe to say that Joe Soap in the street will get F*CK ALL!

bernithebiker

I used to work for an oil major, and prices have been pushed up (and down, if it suits) for many, many years.

estampida

so I will cover what I know about this subject ( I worked with an oil company for 10 years running my own engineering department) our application of engineering, why it was Fiscal Measurement (tax revenue from oil production), there was always talk of fixing and control of price (not this rate fixing but there are skeletons in the cupboard).

I will start with the obvious observations that I can plainly see:

so look at the price of petrol and crude (prices are never that fixed they do float) but:

1996 - crude $35 a barrel - Petrol 0.69 £/ltr

2013 - crude $103 a barrel - petrol 1.35 £/ltr

so the first thing you will notice that oil price increase is not linked to petrol increase even though thats what they say when on bbc news....
why is this ratio not checked... this is where they are tanning the profit and blaming the fuel duty accelerator, BP for the last 20 years has made on average 3 billion profit every quarter.........

and its weird that if oil price drops slightly OPEC just stop producing as much to push the price back up, wars drop the price for small intervals of time... maybe syria is a good way of making oil cheaper again....

But my knowledge of price fixing: (this will get a little complicated)

Before british gas and centrica split they were 1 company, they bought gas from the oil companies that mine and pump to shore.

Those companies bought mining licenses from thatcher for large sums of money, you know the cash that propped up london for the last 30 years, and there was no benefit from.

Brit gas before it was sold off, they signed contracts (so a government minister) with the oil companies assuring a set price for gas, this was brokered by various agency including the DTI (toothless then but they were doing the right stuff 5 years ago, thats why cameron and co shut it down)

-as a note I have been audited by the DTI several times and they disbanded and was reformed 1 week later a few years ago to erode the rights the DTI enjoyed (you had no right to silence, don't answer a question, trouble and lots of it, if only google and amazon could be questioned by the old organisation)

The contract stated they would buy gas at 22.5 p per cube for term of contract. (how much are you charged right now)
No one check to see how much it cost to produce (convenient wouldn't you say)

Approximate cost TODAY for production, that price to the point of the export line from onshore refinery 18 p per cube, in 1990 it was closer to 4p per cube and they bought it at 22.5 p per cube......

so for the last 25 years or so you have been robbed on your gas bill, as BG pass this cost onto the consumer, this markup is enjoyed by shareholders of BG & oil companies dividend. (the thatcher crew)

and like electricity bills they make it difficult to work out costs as they state the calorific value of the gas not the volume

as soon as you see thing like "adjusted price" it lies constructed to make costs look balanced.....

who's angry now?

daviesee

Is this really news to anyone?
You only need to think of the whole point of OPEC.

PS:- Guesstimate figures but even if the oil companies gave the petrol for free it would still be around £1 per liter for tax. The Government play their part.

Pituophis

Anyone remember the recent inquiery into price fixing in car insurance? Seems to have just melted away :shock:
(I could currently insure a Ford Fiesta - 1.2L - £5000 for between 5 and £800. I can insure an Audi RS4 - 4.2L - £19500 for between 7 and £1000 at the moment depending on who I choose. WTF???)

Why is anybody surprised that we are being ripped off, or that nothing will change? :roll:

bernithebiker

estampida wrote:

so I will cover what I know about this subject ( I worked with an oil company for 10 years running my own engineering department) our application of engineering, why it was Fiscal Measurement (tax revenue from oil production), there was always talk of fixing and control of price (not this rate fixing but there are skeletons in the cupboard).

I will start with the obvious observations that I can plainly see:

so look at the price of petrol and crude (prices are never that fixed they do float) but:

1996 - crude $35 a barrel - Petrol 0.69 £/ltr

2013 - crude $103 a barrel - petrol 1.35 £/ltr

so the first thing you will notice that oil price increase is not linked to petrol increase even though thats what they say when on bbc news....
why is this ratio not checked... this is where they are tanning the profit and blaming the fuel duty accelerator, BP for the last 20 years has made on average 3 billion profit every quarter.........

and its weird that if oil price drops slightly OPEC just stop producing as much to push the price back up, wars drop the price for small intervals of time... maybe syria is a good way of making oil cheaper again....

But my knowledge of price fixing: (this will get a little complicated)

Before british gas and centrica split they were 1 company, they bought gas from the oil companies that mine and pump to shore.

Those companies bought mining licenses from thatcher for large sums of money, you know the cash that propped up london for the last 30 years, and there was no benefit from.

Brit gas before it was sold off, they signed contracts (so a government minister) with the oil companies assuring a set price for gas, this was brokered by various agency including the DTI (toothless then but they were doing the right stuff 5 years ago, thats why cameron and co shut it down)

-as a note I have been audited by the DTI several times and they disbanded and was reformed 1 week later a few years ago to erode the rights the DTI enjoyed (you had no right to silence, don't answer a question, trouble and lots of it, if only google and amazon could be questioned by the old organisation)

The contract stated they would buy gas at 22.5 p per cube for term of contract. (how much are you charged right now)
No one check to see how much it cost to produce (convenient wouldn't you say)

Approximate cost TODAY for production, that price to the point of the export line from onshore refinery 18 p per cube, in 1990 it was closer to 4p per cube and they bought it at 22.5 p per cube......

so for the last 25 years or so you have been robbed on your gas bill, as BG pass this cost onto the consumer, this markup is enjoyed by shareholders of BG & oil companies dividend. (the thatcher crew)

and like electricity bills they make it difficult to work out costs as they state the calorific value of the gas not the volume

as soon as you see thing like "adjusted price" it lies constructed to make costs look balanced.....

who's angry now?

I was in fact an oil trader for 10 years.

The difference between the crude and the gasoline prices is known as the 'crack' and will vary all the time, according to demand for the 2 products.

For example, during the summer, the US usually buys in a lot more gasoline, and the crack will increase. Same applies to diesel, jet, fuel, etc.

By collecting together all these 'cracks' you then have the refining margin - what you make on every barrel of crude. You can choose a crude high in diesel yield for example, if the diesel crack is high.

Crude and gasoline and diesel have futures markets in Europe and the US, and are difficult to manipulate as they are open to everyone and the volumes are vast.

HOWEVER, the majority of European prices are set be a company called Platts that takes into account these futures markets, but adds a premium or discount for say Unleaded 95, heating oil, Ultra Low Sulphur Diesel, etc.

It is here, that the manipulation is taking place and the price setting is very opaque and is down to the judgement of one, maybe 2 people at Platts.

They phone round all the major players (not just majors, also traders like Glencore, Vitol, Cargill, etc), and speak to the traders to get a feel for the market.

Asking a trader to give a clear and unbiased opinion of a market that he is trading in is clearly a highly risky business. Said trader is sorely tempted to 'talk his book' and push the market in his direction. He can also make trades (Platts values these above all else) at artificially high or low levels to influence the prices set by Platts.

THIS is why the offices of various oil companies and PLatts have been raided.

Crouching Peeky

Isn't this a non-story though? The two companies involved are private companies and should be able to charge what the hell they like. They don't have a monopoly on garages, plenty of choice. More ideological BS from what I can see.

MisterMuncher

Choice is only if there is real and meaningful competition within the sector. I pass filling stations belonging to six or seven different companies and a few supermarkets every day and there's not anything one could reasonably describe as such. The prices vary by no more than 8p, or 3p if we exclude the self-service unmanned joint as operating on a different model. When the market acts in lockstep like this, it may as well be a monopoly.

bernithebiker

Crouching Peeky wrote:

Isn't this a non-story though? The two companies involved are private companies and should be able to charge what the hell they like. They don't have a monopoly on garages, plenty of choice. More ideological BS from what I can see.

No, because the prices that Platts sets are what almost every end user is connected to. Platts is a private company that effectively sets public prices.

the playing mantis

its well dodgy. regulation is not statutory which is ridiculous. the government need to get involved and proper regualation needs to be implemented, but is again to late, just as it was for libor

the impact at the pump is unqualifiable though.

simonhead

I would be surprised if any of the big oil companies get anything more than a slap on the wrist for this. Interesting that hours after the raids BP asks the government for help over spiralling costs of compensation for the GoM.

bernithebiker

the playing mantis wrote:

the impact at the pump is unqualifiable though.

It is IF it can be proven that BP, Shell, et al, have been feeding Platts dubious information, because the price you pay at the pump is DIRECTLY linked to Platts published prices.

(Platts European Marketscan - usually, distributors pay the average of the month's quotations).

Frank the tank

simonhead wrote:

I would be surprised if any of the big oil companies get anything more than a slap on the wrist for this. Interesting that hours after the raids BP asks the government for help over spiralling costs of compensation for the GoM.

I saw that article on the news, an entire industry has bloomed around claiming off BP.

Shame the yanks weren't so hot on sorting the compo over Bhopal.

bernithebiker

Here is a link to Platts' price page;

http://www.platts.com/IM.Platts.Content ... ktscan.pdf

Look at Gasoline 10ppm, CIF NWE (this means delivered in North West Europe), $969 per tonne.

ULSD 10ppm is the diesel you buy at the pump, here quoted at 981$ per tonne.

These prices form the basis of what you pay at the pump, + a premium to cover transport and storage from the port.

(For those interested 1 tonne of gasoline is approx. 1342 litres = 72 cents per litre, about 50p!)

the playing mantis

bernithebiker wrote:

the playing mantis wrote:

the impact at the pump is unqualifiable though.

It is IF it can be proven that BP, Shell, et al, have been feeding Platts dubious information, because the price you pay at the pump is DIRECTLY linked to Platts published prices.

(Platts European Marketscan - usually, distributors pay the average of the month's quotations).

but can it be put into monetary terms? the whole system with platts is arcane. when certain areas of banks and trading certain products is bogged down in regualtion, it is amazing that this was outside statuatory regulation. how could it be proven if platts were complicit?

bernithebiker

the playing mantis wrote:

bernithebiker wrote:

the playing mantis wrote:

the impact at the pump is unqualifiable though.

It is IF it can be proven that BP, Shell, et al, have been feeding Platts dubious information, because the price you pay at the pump is DIRECTLY linked to Platts published prices.

(Platts European Marketscan - usually, distributors pay the average of the month's quotations).

but can it be put into monetary terms? the whole system with platts is arcane. when certain areas of banks and trading certain products is bogged down in regualtion, it is amazing that this was outside statuatory regulation. how could it be proven if platts were complicit?

If you gather sufficient evidence, you can compare where the market SHOULD have been with where it was quoted and look at the difference (eg. $20/tonne).

It is then tricky to say how much in total has been scammed because you can't easily collect together every single little company that prices off Platts. But say Distributor X shifted 5000 tonnes of heating oil in January, then it can be argued that $100 000 went missing right there.

Also, I don't think Platts is complicit - they have been raided, I suspect, simply to gather numerical evidence. You have 1 or 2 Platts reporters being paid about 25 grand a year, being asked to accurately price a market based on the almost sole testimony of about 30 ambitious, scruple free, cunning traders. It's kind of lamb to the slaughter time......

the playing mantis

this makes it even more unbelievable that its been effectevile unregulated for so long. this could be huge couldnt it?

VTech

Almost everything we buy is price fixed.
Imagine if they released all of the worlds diamonds ! They would all become worthless, after all, the only precious item we have in that fashion is gold and that is problematic.

It's just a matter being found out with hard proof rather than wondering wether it is happening

bernithebiker

VTech wrote:

Almost everything we buy is price fixed.
Imagine if they released all of the worlds diamonds ! They would all become worthless, after all, the only precious item we have in that fashion is gold and that is problematic.

It's just a matter being found out with hard proof rather than wondering wether it is happening

True, but there is a difference between high prices because of genuine demand or supply shortage, and high prices because a market player is actively seeking to artificially change the 'normal' price through lying or by colluding with other players, and by creating 'fake' deals to influence price reporting.

There are 2 aspects to the oil price; the first, and the bulk of the price is made up of the internationally traded futures markets, NYMEX and IPE (or ICE now). These are very liquid and are traded in vast quantities. This is what sets the bulk of the crude, gasoline and diesel prices. These markets are difficult for traders to manipulate, and if they try, require vast, positions. Only OPEC or Saddam types have the power to move these markets effectively.

The 2nd aspect is the one mentioned above - the premium applied to these futures to establish individual prices for each market. This is where Platts comes in, and where manipulation becomes a lot easier.

A common gasoline cargo size is 80 000 tonnes. This is worth around $80m, at a price of approx. $1000/tonne. All a trader has to do is slice off a few $/tonne, and he's made close to half a million.......

The main reason that oil prices are high is because we're using so much of the stuff - traders can't be blamed for that. The consumption is truly huge, and is rising every day (China, et al).

VTech

The problem is that oil companies buy out technology to allow a lesser usage, there is no real plans for sales over and above modern era imo as it will always be a get rich quick type of business (in that I mean that people look to what can be achieved in their lifetime rather than long term future)
Does anyone know how cheap fuel enters the market at ? I mean to purchase by a forecourt ready to sell to Mr Joe.

bernithebiker

VTech wrote:

Does anyone know how cheap fuel enters the market at ? I mean to purchase by a forecourt ready to sell to Mr Joe.

See my post above, about 50p/litre at the port, call it 65p ish at the pump, the rest is tax. Of course the price moves every day, but these guys usually pay average of the month.

tiredofwhiners

Its all b*llocks.

The overwhelming vast majority of the price at the pump is tax. Thats where the fiddling occurs.

Its like arguing over the price of gearsticks in cars and how they distort the price of cars. And if it hasn't escape the government notice, there's this thing called OPEC which is a cartel.

There is precisely nothing the government can do, as someone else will buy the oil if the government tried strong arm tactics.

MountainMonster

It is a real shame that fuel is taxed so much by almost every government in Europe, and yet they know it is a necessity for a large portion of the population. I never knew it was over double the price of the fuel itself once it gets to your pump and the government take their chunk. Crazy!

bernithebiker

tiredofwhiners wrote:

And if it hasn't escape the government notice, there's this thing called OPEC which is a cartel.

True, OPEC is a cartel, and will always be trying to steer the price where they want it (interestingly, they have realized that pushing the price too high is counter-productive as it promotes demand destruction (electric cars, etc.) so they're happy with it around the $100/bbl mark.

And when European governments complain to OPEC that the price is too high, OPEC just laugh in their faces and point out that more than 1/2 the pump price is tax, so if they want cheaper fuel they can just reduce some of the tax......hard to argue with that....!

ballysmate

Enough of all this! How will the cost of the Johnson's Baby oil that I like the missus to rub me down with be affected?
They don't call it 'Johnson's' oil for nothing. :oops:

seanoconn

Ballysmate wrote:

Enough of all this! How will the cost of the Johnson's Baby oil that I like the missus to rub me down with be affected?
They don't call it 'Johnson's' oil for nothing. :oops:

Damn you Eurovision! Ballysmate is going out of his mind with boredom and is subjecting us to crap!

ballysmate

seanoconn wrote:

Ballysmate wrote:

Enough of all this! How will the cost of the Johnson's Baby oil that I like the missus to rub me down with be affected?
They don't call it 'Johnson's' oil for nothing. :oops:

Damn you Eurovision! Ballysmate is going out of his mind with boredom and is subjecting us to crap!

I'm full of it. It just needs a catalyst for it all to spew forth.

daviesee

Ballysmate wrote:

seanoconn wrote:

Ballysmate wrote:

Enough of all this! How will the cost of the Johnson's Baby oil that I like the missus to rub me down with be affected?
They don't call it 'Johnson's' oil for nothing. :oops:

Damn you Eurovision! Ballysmate is going out of his mind with boredom and is subjecting us to crap!

I'm full of it. It just needs a catalyst for it all to spew forth.

Is the catalyst the Johnson's?

ballysmate

daviesee wrote:

Ballysmate wrote:

seanoconn wrote:

Ballysmate wrote:

Enough of all this! How will the cost of the Johnson's Baby oil that I like the missus to rub me down with be affected?
They don't call it 'Johnson's' oil for nothing. :oops:

Damn you Eurovision! Ballysmate is going out of his mind with boredom and is subjecting us to crap!

I'm full of it. It just needs a catalyst for it all to spew forth.

Is the catalyst the Johnson's?

Touché!