Sunday, May 24, 2015

Does Big Oil fix fuel prices?

Capitalist benchmarks under investigation

Does Big Oil fix fuel prices?

(AP File Photo)
(AP File Photo)

"Price fixing is an evil, wicked thing," the late Sun Oil Co. (Sunoco) boss Joseph Newton Pew warned the nation and rival oilmen during the Great Depression. Pew was scolding President Roosevelt and a cabal of Texas oil operators, who was trying to keep prices from falling so energy companies would stop laying off workers. But in today's world markets, it's the capitalist traders who are being investigated for propping up fuel costs at the public's expense.

Americans who watch the price of gasoline jump (and, sometimes, slip) with surprising speed commonly suspect big oil companies and traders of price manipulation. The companies and their allies in Congress just as regularly deny it. But since British oil giants Shell and BP changed the way they measure crude oil prices, European regulators have been investigating just how closely the majors work together to manipulate fuel prices, Bloomberg reports here.

The investigation recalls last year's still-unfolding scandal over financial traders who manipulated the London interbank offered rate (Libor), the benchmark price of money, says Reuters here. Both oil and money prices are measured by the London trading desks of big U.S., European and Japanese banks -- but these lightly-regulated benchmarks of capitalism are vulnerable to speculators who care more about their profits than honest pricing.

McGraw-Hill's Platt's, which publishes and analyzes oil industry trends, has fought previous attempts by regulators to open up the process to public scrutiny and government oversight, says the Wall St. Journal here.

About this blog

PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, distefano251@gmail.com, 215.854.5194 or 302.652.2004.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano