European anti-trust officials have carried out surprise inspections in The Hague, London and Oslo as part of a new investigation into suspected attempts at manipulating benchmark oil pricing by several oil companies, including Hague-based Royal Dutch Shell and Statoil, the government-controlled Norwegian energy company.
In a statement, the European Commission said it “…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.
“Furthermore, the Commission has concerns that the companies may have prevented others from participating in the price assessment process, with a view to distorting published prices.”
Oil prices assessed and published by agencies such as McGraw Hill’s Platts, Petroleum Argus and Reed’s ISIS are important references for physical delivery and derivatives markets around the world.
A Shell statement confirmed that its group companies were cooperating with the EC investigation but offered no further comment. Likewise, Statoil said it was cooperating with the inquiry, which it said related to Platts’ price assessment process for crude oil, refined oil products and biofuels.
“Platts confirms that the European Commission has undertaken a review at its premises in London this morning in relation to the Platts price assessment process,” the New York-based company said, adding it was also cooperating fully with European authorities.
If confirmed, the manipulations would be more evidence of the growing turmoil in the world energy market as the United States transforms itself from dependency on imported oil to the world’s largest energy producer, surpassing even Saudi Arabia, and the output of the Middle East, Nigeria and other oil producers begins to be consumed by the developing world.
While it is may come as a surprise to most Americans, who still see the country in thrall to the oil sheikhs, North American oil production is booming. In 2011, the U.S. became a net energy exporter for the first time since 1949.
According to the Maria van der Hoeven, executive director of the International Energy Agency, “North America has set off a supply shock that is sending ripples throughout the world. This is helping to ease a market that was relatively tight for several years.”
Thanks to rising production of shale gas, light tight oil (petroleum extracted from shale or sandstone by fracking) and Canadian oil sands, The IEA predicts North America’s output will increase by nearly 4 million barrels a day by 2018. At that rate, the U.S. will overtake Saudi Arabia by 2020 and be completely energy independent by 2030.
“The shock waves of rising U.S. shale gas, light tight oil and Canadian oil sands production are reaching virtually all recesses of the global oil market,” said the IEA in its latest report.
Will all of this change produce the one change Americans would love to see: lower prices at the pump? Not likely; high oil prices (above $70/barrel) are what make use of the new technologies feasible. However, an energy-secure U.S. could potentially save billions of dollars and thousands of lives by being able to disengage itself from the need to protect its foreign oil resources.