Shell and BP under investigation for price collusion
Royal Dutch Shell and BP are under investigation for colluding to rig oil prices for more than a decade.
The European Commission (EC) has raided the oil giants' offices to investigate claims that they 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".
It added that the price collusion, which may have been going on since 2002, could have had a "huge impact" on the price of petrol at the pumps "potentially harming final consumers".
Raids were also carried out at the London office of price-reporting agency Platts and the Stavenger office of Norway's Statoil, both of which are also under investigation. Prices reported by agencies such as Platts are used as the benchmarks for trade in a huge number of products, including the petrol price.
The EC stressed that the investigations were at early stages and did not imply guilt.
MPs and officials have suggested the oil price could be vulnerable to being rigged in the same way as the Libor lending rate was rigged by banks, which led to fines millions of pounds for the lenders.
However, industry sources suggested the scale of fines, even if companies were found culpable, would not be great.
Analysts echoed this view, expressing scepticism that the probe would prove as significant to the oil companies as Libor was to banks.
Peter Hutton, oil analyst at RBC Capital Markets, said: "It's hard to see at this stage what we should be reacting to. It's under investigation, it's still very early days, and people don't know the scale or any culpability."
This article was written for our sister website Interactive Investor
The London Inter-Bank Offer Rate is the rate at which banks lend to each other over the short term from overnight to five years. The LIBOR market enables banks to cover temporary shortages of capital by borrowing from banks with surpluses and vice versa and reduces the need for each bank to hold large quantities of liquid assets (cash), enabling it to release funds for more profitable lending. LIBOR rates are used to determine interest rates on many types of loan and credit products such as credit cards, adjustable rate mortgages and business loans.