After the European Commissions probe into possible oil price manipulation started last week, the circle of companies to come under scrutiny has widened. Some of them are investigated, while others are asked to assist by providing information. Royal Dutch Shell, BP, Statoil – three of Europe’s biggest oil producers, and Platts – the oil-price data collector owned by McGraw Hill Financials Inc., were the first four companies to come under scrutiny by the European regulators. They were followed by Neste Oil Oyj, Finland’s only refiner.
The energy-price reporting agencies,Platts, Argus Media Ltd. and Reed Business Informations ICIS, announced that they ordered separate independent reviews of their methods and activities to protect against market manipulation. Platts review is to start in June and to be completed by the end of the year. The second two companies methods should be evaluated until October. Auditors will assess whether the agencies have worked according to the International Organization of Securities Commissionss principles.
According to Total SA – Europe’s 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.
Dan Tanz, Platts vice president of editorial e-mailed to Bloomberg: “A review by an external auditor as called for by the IOSCO principles will demonstrate to regulators the strength of Platts’s internal controls.” He assured that the agency has a long track record of “strong internal governance”.
About the comparison with the Libor investigation last year, Adrian Binks, Argus’s chairman and chief executive in London, said by e-mail for Bloomberg May 20: “This is nothing like Libor. Price reporting agencies are independent companies that compete with each other. It’s really industry’s choice to use our quotations. We’re not receiving money for the trades. We’re not like the banks.”
Argus hasnt been visited or been asked questions by the EU regulators yet. ICISs head of regulation and compliance said by phone for Bloomberg: “We’ve agreed to go through this external audit on a voluntary basis to demonstrate that we’re following the best practices as set out by IOSCO”.