The London offices of BP and Shell were subject to dawn raids last month by the European Commission (EC) who are investigating allegations of oil price fixing. The action comes just four months after the OFT ruled out their own investigation citing “very limited evidence” that falls within the meaning of wholesale prices not being reflected at the point of sale. The UK Government has come under criticism and has been forced to explain why the OFT failed to act. Energy Secretary Ed Davey has responded by highlighting the concurrent review by the Financial Conduct Authority and OfGem into market manipulation in the sector.

BP, Shell and Norway’s Statoil and Platts (the price reporting agency), have all confirmed that they are being investigated for what the EC describes as distortion of the published prices of oil by preventing competitors from participating in the price assessment process. If true, such activity constitutes a breach of European competition/antitrust laws. The investigation comes at time when traded commodities have become increasingly important investments. The allegations have been described by former Liberal Democrat Treasury spokesman Lord Oakshott, “as serious as rigging Libor.” Other commentators have noted the resemblance to the Libor investigation as the transactions are processed by those with a vested interest in their performance through unregulated and opaque exchanges. If cartel or restrictive business practices are found to exist, there could follow substantial regulatory fines and criminal sanctions. Last week, the SFO confirmed that it is considering a criminal inquiry,the Prime Minister stating that, “[t]here is obviously the full force of the law available… so let’s let the investigators do their work. If this has been happening it is very, very serious and major consequences will follow.”