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CTV News | Unpublicized oil price fixing probe began last year

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Home : Top Stories : Unpublicized oil price fixing probe began last year

Unpublicized oil price fixing probe began last year

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CTV Newsnet: BNN's Michael Hainsworth with more

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CTV.ca News Staff

Date: Thu. May. 29 2008 5:32 PM ET

Disclosure of a probe into possible price manipulation may have been behind a sharp drop in oil prices Thursday.

Light, sweet crude's July delivery prices fell US$4.41 to $126.62 a barrel on the New York Mercantile Exchange.

The U.S. Energy Department said the decline was due to some temporary delays in unloading Gulf Coast tankers. A stronger U.S. greenback and concerns over gas demand may also have been behind the drop.

But analysts said disclosure of an investigation into possible price manipulation may have also been a factor. The Commodity Futures Trading Commission (CFTC) revealed it has been investigating the matter for the past six months as part of a wider look into the U.S. oil market.

In Washington, the commission said the probe began in December and it has now gone public "because of today's unprecedented market conditions." However, much of their work remains confidential.

BNN's Michael Hainsworth told CTV Newsnet Thursday afternoon that the watchdog agency began its investigation after U.S. lawmakers "demanded a crackdown on speculators."

"What we got today is a deal with other exchanges in Europe. The CFTC will soon start seeing a flood of information about who is trading, what they're trading, how much they're trading -- and it is aimed at helping determine if there's manipulation in the market."

Hainsworth said critics have claimed "that economics 101 is not responsible for current prices we're paying at the pumps."

He said OPEC has insisted that supply is strong and demand is weakening.

"Some peg prices at $20 higher than they should be. That translates to about 20 cents more per litre at the pumps," Hainsworth said.

Some analysts say that the relatively big drop in crude oil prices Thursday may suggest the bullish rise of oil prices -- which topped $135 a week ago -- may have lost some momentum. Since December crude prices have shot up by more than 42 per cent.

"This was the first time we've had a bearish reaction," said James Cordier, president of the Liberty Trading Group and OptionSellers.com, Florida based trading firms.

Some analysts said they expected to see an oil price increase -- rather than a price drop -- because of news that crude oil inventories fell last week, along with gas supplies.

Comments are now closed for this story

The Widowmaker
said

Really? Price fixing. Like that's a surpriSe. The only problem is the government. They get a percentage tax. Not a fixed tax. So why would they do anything about high prices. The higher the price the higher the tax $$$$$. Oil companies are making zillions. Price gouging and nothing can be done until the government steps up to the plate. But like that will happen.


Steve in Ottawa
said

This revelation simply shocks and astounds me.
Yes, that's sarcasm.


Dean
said

There is so much money involved with the oil companies that I doubt an investigation would ever happen properly. Payoffs, I believe, would take place and the companies would magically be found innocent of any wrongdoing. It will be a sham.


Jeff Germaine
said

No one uses less fuel because of a increase in prices, it just takes more out of our pockets and they know that. If oil supply were really a concern then make fuel economy diesel cars and truck the greater pecent of the auto population. And quit scamming us please, try honesty, who knows might even like it, but I don't think so.


dw
said

I read that some of the speculation on oil futures came from bank controled funds. This does not make sense would serve to push up the price. If you do not intend to take delivery this should not be allowed.


Tori
said

Price fixing, who would have thunk it??

Maybe we need a class action law suit against the oil companies in Canada and the US.

This goes right along with the electric company, the cable companies and cell phone companies. We keep paying and paying and they keep demanding more without making any changes. To make the best of it, all of their pricing is blamed on the oil prices.


Kevin D
said

First off Canada's government can't really do anything about the price fixing when it comes to market futures trading as it is the US market which is 15 times our size that determines the price. However I just find it so ironic that every gas station in Canada raises and lowers its price the same amount at the same time and these increases (and sometimes though rare a small decrease) do not correspond to the market trading price of oil. I guess that this is just all a very lucky streak of coincidences that has occured since 1988. That is what the Canadian government needs to look into.


Al H
said

This same game was played in the 1970's.
How soon we forget


Tony Di Donato
said

Folks,people power is what we need. Let everybody and I mean everybody stop using any gas driven vehicle for no less than a day to a week and that's all she wrote. We keep forgetting that WE the people are responsible for our situation no more no less. We need to let the bigger dogs know that a whole bunch of small dogs can fight back. Yet we continue to dish out and cry and yell, but in fact we do nada. So it goes friends. They win and we will always loose.
NB: Weren't you the one who bought that brand new SUV guzzler recently?
Tony D


letssee
said

Humm, the chase is afoot.
With a powerful and, more than likely, non-corrupt government agency doing a full-scale investigation into the dealings of the oil world, we should see some interesting developments.
The first being the "uh-oh" when the oil folks learned of the investigation and oil prices dropped.
The U.S. government's record in dealing with those fiddling with the markets has been quite good.
Let's hope they do a great job.




Frank Buchan
said

I believe the actual investigation isn't focused on oil companies, but on commodity speculators. The difference is pretty important to whether the outcome is fair. Ologopolists like oil companies have price stickiness in their favour to deflect price-fixing charges; speculators don't. If they are strategically inflating the commodity value by their trading practices, they could easily be found guilty of collusion, and they haven't any real defence based upon their market type.


krispittman
said

Why isn't the Canadian Government and regulatory bodies doing this kind of work on behalf of Canadians. It's little wonder that we have an inferiority complex as it applies to the United States, we whine and complain and complain some more, while our governments are tired of Canadians crying wolf. We're letting drug addicts, and aboriginals and cultural/religious groups skirt the law if not break it our right, while struggling Canadians of which there are many who can't call a human right commission or cry discrimination or some such nonsense are almost on the verge of breaking the law as a result of the insane cost of existing in this backward multi-cultural failure of a nation, if it can ever loosely be be considered a nation at all. Our priorities as a are so far from the realm of acceptable that one must consider why we tolerate anything at all, why is it that we can't hold any one accountable?


John
said

I hate paying the price at the pump same as the next person. I have cut back my driving to the minimum. There is a positive here however, that is the rise in price is spurring alternate energy research. It is also forcing people to look at smaller vehicles vice wasteful SUV's. The sooner we get off oil the better.


Cara B
said

Amazing how no one seems surprised. Funny, I'm sure they've "investigated" this before and always come to the conclusion that there is no price-fixing. Kind of makes one wonder if something is getting greased there (pardon the pun).... Like they say, follow the money.


Doug BC
said

Not buying gas for a week or so would not really help.Only longer term decreases in demand would push the prices lower.And every litre we save in North America is quickly bought up by increased usage in Asia.
I heard last week that the US congress wants the ability to sue OPEC,and force them to produce more oil.In other words,it seems to me,they want the right to dictate production levels and prices all over the planet.How can that be a good thing for sovereign nations?
We have to make changes.But the oil belongs to the people of the country that is producing it.Not the whim of the USA or Canada.I still remember when Mr.Trudeau claimed Alberta's oil belonged to Canada,and had to be sold in Canada,at prices far below market value.
Like it or not,this will be a supply and demand product.The most we can hope for in Canada is a long term strategy to stop governments from taxing it so heavily,the ability to refine crude oil here,for our own use,and amending trade deals that require us to export oil no matter what the market conditions or how much we need the product here.
We can't really expect producing provinces to sell it at less than fair market value.But we can control the taxes,and return to a system which places Canadians at the head of the line.
It makes no sense to export crude to the USA and look across the border to see their gas almost a dollar per gallon cheaper than it is in Canada.We MUST do better than this.


Ki-Som
said

Can you say, hands caught in the cookie jar?? If anyone finds this as a huge surprise, is either really stupid or have been living in caves for a very long time.


Brenda W
said

I just go to the gas station now and ask for a certain amount, (40.00 worth please) and pay in cash. If it don't last two weeks, well sucks to be me. It's all I've got. Prices can get raised into oblivion. My pockets only go so deep.

I refuse to go into debt to make them rich! maybe if we all worked that way, they'd get the message.


John G.
said

Bravo for the U.S. The Canadian government should also be conducting such an investigation. Instead they do nothing, roll over and allow Canadians to be gouged.


Mike
said

Where is Michael Moore when you need him to make a documentary? This is absolutely ridiculous and there is no way the prices are a result of fundamental economics...the industry is an oligopoly and the oil companies seem to "magically" keep experience substantial growth in profits year-after-year...the airlines are now starting to clue in as well that these products and services are necessities which allows them to charge pretty much anything they want for whatever they want....this can't be good for the economy...my vote is going to the politician who has the balls to step in and do something to protect the average Canadian...I'm not very optimistic I'll be voting!!!


Michael
said

If you are any good at all at reading the markets you will know that price fixing happens all the time.

It's not a matter of whether people are doing it with crude oil prices - the important questions are WHO is doing it and WHY they are doing it. I suspect money is not the primary motive. Rather, I suspect there is a political component to the answers to these 2 questions.


MB
said

I'm wondering if the big banks and investment houses are keeping the price up to cover positions thy've lost during the credit crisis. Makes sense to buy $xxx of oil, then say it is going up to $150, then sell at a ridiculous profit.


Brad B
said

Widowmaker, check your facts. 34.7 cents on a litre are fixed (in Ontario). The only % tax is the GST, which at cost of $1.20/litre is about 8 cents. The increase the gov gets from price hikes is minimal compared to the overall fixed tax. Not arguing there's a problem; it sux! But get the accusations correct.


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