Petrol prices might have been fixed in same way as Libor
MPs call for inquiry after G20 report says oil price is open to 'manipulation' because it relies on honesty of traders
OIL PRICES are likely to have been rigged in the same way as the Libor rate, forcing drivers to pay more for petrol, according to a G20 report. MPs are now calling for the inquiry into Barclays' manipulation of the Libor interbank lending rate to be expanded to petrol prices.
Petrol prices on UK forecourts reached a record high of 137p per litre earlier this year before falling back slightly.
The price drivers pay to fill their tanks is linked to the cost of oil, which is calculated by two main price reporting agencies, Platts and Argus, based on data collected from banks, hedge funds and oil companies.
The G20 report, compiled by the International Organisation of Securities Commissions (IOSCO), found that because the companies collecting this data rely on the honesty of traders, and because these traders have an "incentive" to distort the market, the oil price is open to "manipulation".
US regulators have already highlighted the likelihood that oil prices might have been fixed, The Daily Telegraph reports. Commissioner Scott O'Malia of the US Commodity Trading Commission has spoken of the "striking similarity" between price reporting agencies in the oil market and Libor.
Robert Halfon, the Conservative MP for Harlow who with 100 fellow MPs has campaigned for lower petrol prices, said the Bank of England must investigate potential manipulation "urgently".
The Petrol Retailers' Association has also supported an inquiry, saying:
"All the petrol retailers buy their products based on Platts prices. If IOSCO thinks the price is open to manipulation it could well be and that would affect prices on the forecourts."
However, Platts and Argus have hit back, highlighting "fundamental differences" in the way they calculate oil prices and the way Libor is estimated. In a joint statement, the companies said: "Independent price reporting organisations are independent of and have no vested interest in the oil and energy markets." ·