Is EVERY Market Rigged?

European Union Launches Investigation Into Manipulation of Oil Prices Since 2002

CNN reports:

The European Commission raided the offices of Shell, BP and Norway’s Statoil this week as part of an investigation into suspected attempts to manipulate global oil prices spanning more than a decade.

None of the companies have been accused of wrongdoing, but the controversy has brought back memories of the Libor rate-rigging scandal that rocked the financial world last year.

***

A review ordered by the British government last year in the wake of the Libor revelations cited “clear” parallels between the work of the oil-price-reporting agencies and Libor.

“[T]hey are both widely used benchmarks that are compiled by private organizations and that are subject to minimal regulation and oversight by regulatory authorities,” the review, led by former financial regulator Martin Wheatley, said in August . “To that extent they are also likely to be vulnerable to similar issues with regards to the motivation and opportunity for manipulation and distortion.”

***

In a report issued in October, the International Organization of Securities Commissions — an association of regulators — said the ability “to selectively report data on a voluntary basis creates an opportunity for manipulating the commodity market data” submitted to Platts and its competitors.
Responding to questions from IOSCO last year, French oil giant Total said the price-reporting agencies, or PRAs, sometimes “do not assure an accurate representation of the market and consequently deform the real price levels paid at every level of the price chain, including by the consumer.” But Total called Platts and its competitors “generally… conscientious and professional.”

***

“Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers,” the European Commission said this week.

USA Today notes:

The Commission … said, however, that its probe covers a wide range of oil products — crude oil, biofuels, and refined oil products, which include gasoline, heating oil, petrochemicals and others.

***

The EU said it has concerns that some companies may have tried to manipulate the pricing process by colluding to report distorted prices and by preventing other companies from submitting their own prices.

***

Unlike oil futures, which set prices for contracts, the data used in the MOC process is based on the physical sale and purchase of actual shipments of oil and oil products.

***

According to Statoil, the EU investigation stretches back to 2002, which is when Platts launched its MOC price system in Europe. The suspicion is that some companies may have provided inaccurate information to Platts to affect the oil products’ pricing, presumably for financial gain.

Fox points out:

At issue is whether there was collusion to distort prices of crude, refined oil products and ethanol traded during Platts’ market-on-close (MOC) system – a daily half-hour “window” in which it sets prices.

But the European Commission also is examining whether companies were prevented from taking part in the price assessment process.

The Guardian writes:

The commission said the alleged 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”.

Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was “as serious as rigging Libor” – which led to banks being fined hundreds of millions of pounds.

He demanded to know why the UK authorities had not taken action earlier and said he would ask questions of the British regulator in Parliament. “Why have we had to wait for Brussels to find out if British oil giants are ripping off British consumers?” he said. “The price of energy ripples right through our economy and really matters to every business and families.”

***

Shadow energy and climate change secretary Caroline Flint said: “These are very concerning reports, which if true, suggest shocking behaviour in the oil market that should be dealt with strongly.

“When the allegations of price fixing in the gas market were made, Labour warned that opaque over-the-counter deals and relying on price reporting agencies left the market vulnerable to abuse.

“These latest allegations of price fixing in the oil market raise very similar questions. Consumers need to know that the prices they pay for their energy or petrol are fair, transparent and not being manipulated by traders.”

Shadow financial secretary to the Treasury Chris Leslie said: “If oil price fixing has taken place it would be a shocking scandal for our financial markets.

The Telegraph reports:

97 per cent of all we eat, drink, wear or build has spent some time in a diesel lorry,” said a spokesman for FairFuel UK, the lobbyists. “If it is proved, they have been gambling with the very oxygen of our economy.”

***

Platts – to determine the benchmark price – examines just trades in the final 30 minutes of the trading day. A group of half a dozen analysts gather round a trading screen and decide on the final price. As with much that goes on in the City, it is a surprisingly old-fashioned method, reliant on gentlemanly conduct. Critics say it leaves the market open to abuse, and the price can suddenly spike or fall in the final minutes of the day.

The New York Times notes of agencies like Platt and Argus Media:

Their influence is extensive. Total, the French oil giant, estimated last year that 75 to 80 percent of crude oil and refined product transactions were linked to the prices published by such agencies.

The Observer writes that manipulation of the oil markets has long been an open secret:

Robert Campbell, a former price reporter at another PRA, Argus – he is now a staffer at Thomson Reuters, which also competes with Platts and others on providing energy news and data – said this a few days ago in a little-noticed commentary: “The vulnerability of physical crude price assessments to manipulation is an open secret within the oil industry. The surprise is that it took regulators so long to open a formal probe.”

Reuters points out that the probe may be expanding to the U.S.:

In Washington, the chairman of the Senate energy committee asked the Justice Department to investigate whether alleged price manipulation has boosted fuel prices for U.S. consumers.

“Efforts to manipulate the European oil indices, if proven, may have already impacted U.S. consumers and businesses, because of the interrelationships among world oil markets and hedging practices,” Sen. Ron Wyden (D-Ore.), chairman of the Senate Energy and Natural Resources Committee, wrote in a letter to Attorney General Eric H. Holder Jr.

Wyden also asked Justice to investigate whether oil market manipulation was taking place in the United States.

Not only are petroleum products a multi-trillion dollar market on their own, but manipulation of petroleum prices would effect virtually every market in the world.

For example, the Cato Institute notes how many industries use oil:

U.S. industries use petroleum to produce the synthetic fiber used in textile mills making carpeting and fabric from polyester and nylon. U.S. tire plants use petroleum to make synthetic rubber. Other U.S. industries use petroleum to produce plastic, drugs, detergent, deodorant, fertilizer, pesticides, paint, eyeglasses, heart valves, crayons, bubble gum and Vaseline.

The India Times explains that:

The price variation in crude oil impacts the sentiments and hence the volatility in stock markets all over the world. The rise in crude oil prices is not good for the global economy. Price rise in crude oil virtually impacts industries and businesses across the board. Higher crude oil prices mean higher energy prices, which can cause a ripple effect on virtually all business aspects that are dependent on energy (directly or indirectly).

The Federal Reserve Bank of San Francisco points out:

When gasoline prices increase, a larger share of households’ budgets is likely to be spent on it, which leaves less to spend on other goods and services. The same goes for businesses whose goods must be shipped from place to place or that use fuel as a major input (such as the airline industry). Higher oil prices tend to make production more expensive for businesses, just as they make it more expensive for households to do the things they normally do.

***

Oil price increases are generally thought to increase inflation and reduce economic growth.

***

Oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers.

***

Oil price increases can also stifle the growth of the economy through their effect on the supply and demand for goods other than oil. Increases in oil prices can depress the supply of other goods because they increase the costs of producing them. In economics terminology, high oil prices can shift up the supply curve for the goods and services for which oil is an input.

High oil prices also can reduce demand for other goods because they reduce wealth, as well as induce uncertainty about the future (Sill 2007). One way to analyze the effects of higher oil prices is to think about the higher prices as a tax on consumers (Fernald and Trehan 2005).

The Post Carbon Institute notes (via OilPrice.com) that high oil prices raise food prices as well:

The connection between food and oil is systemic, and the prices of both food and fuel have risen and fallen more or less in tandem in recent years (figure 1). Modern agriculture uses oil products to fuel farm machinery, to transport other inputs to the farm, and to transport farm output to the ultimate consumer. Oil is often also used as input in agricultural chemicals. Oil price increases therefore put pressure on all these aspects of commercial food systems.

Figure 1: Evolution of food and fuel prices, 2000 to 2009
Sources: US Energy Information Administration and FAO.

Economists Nouriel Roubini and Setser note that all recessions after 1973 were associated with oil shocks.

Interest Rates Are Manipulated

Unless you live under a rock, you know about the Libor scandal.

For those just now emerging from a coma, here’s a recap:

Derivatives Are Manipulated

The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.

Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed: through gamed self-reporting.

Gold and Silver Are Manipulated

The Guardian and Telegraph report that gold and silver prices are “fixed” in the same way as interest rates and derivatives – in daily conference calls by the powers-that-be.

Everything Can Be Manipulated through High-Frequency Trading

Traders with high-tech computers can manipulate stocksbonds, options, currencies and commodities. And see this.

Manipulating Numerous Markets In Myriad Ways

The big banks and other giants manipulate numerous markets in myriad ways, for example:

  • Engaging in mafia-style big-rigging fraud against local governments. See this, this and this
  • Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here
  • Pledging the same mortgage multiple times to different buyers.  See this, this, this, this and this.  This would be like selling your car, and collecting money from 10 different buyers for the same car
  • Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this
  • Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this
  • Participating in various Ponzi schemes. See this, this and this
  • Bribing and bullying ratings agencies to inflate ratings on their risky investments
This entry was posted in Business / Economics, Politics / World News. Bookmark the permalink.
  • Tonto

    Is every market rigged? Short answer?

    God, yes. That is human nature, to cheat at every available opportunity. How else do you think these people get so rich? This human nature story is older than dirt.

    • gozounlimited

      Ah Buddy…. your Constitutional Rights have been eradicated along with Adam Kokesh. Can You Hear The Jack Boots a comin? We have become the battleground for the corrupt power elites evil partisan war …… On May 18, 2013 the AUMF authorized the US military to operate on a worldwide battlefield from Boston to Pakistan. The Administration is authorized to put boots on the ground wherever the enemy chooses to base themselves, essentially ignoring the declaration of war clause in the US Constitution. http://dprogram.net/2013/05/19/us-suspends-constitution-in-permanent-world-war-on-terror/

  • HS

    I would venture that market rigging is even more widespread than we’ve ever imagined. The laughable part of “free trade” farces like NAFTA is that corporations only want to increase competition on the input side of their business (labor/materials/energy), such that poverty has become a nation’s greatest asset. Meanwhile, the same corporations have used their immense power to greatly restrict competition in their product markets.

    Remember, in the good ole days of representative governance, when the DoJ broke up AT&T into the “Baby Bells” due to anti-trust concerns. Verizon has a virtual monopoly on cell phone access in most of the US and exploits it shamelessly, yet we all know that VZ will only grow larger. Think of how many industries are actually oligopolies now, as a result of unchecked consolidation. Pharmaceuticals, oil, automotive manufacturing, chemicals, software, media, agriculture, shipping, insurance, paper, investment banking, and plastics are just a few of the industries that are controlled by a relatively few players. In the current cesspool of corporately sponsored corruption, that masquerades as a democracy, we’d have to be fairly naive to expect that price fixing doesn’t occur as a matter of course. Traditionally, government regulation and enforcement made collusion and price fixing unprofitable, but those days are gone forever.

    • bold’un

      But actually the article proves too much and is self -defeating. Of course all markets are being manipulated, but if some market participants want higher prices and others lower prices, why then the resultant will be better than expected; similarly relative prices can be important, for instance the relationship of corn with diesel fuel affects farmers – If both move in tandem this is not so serious. If enough prices are manipulated, Adam Smith’s invisible hand puts things right!

  • nveric

    Markets operate not for altruistic reasons, but to get more from whom one trades with.
    “Rigged” is open to interpretation. If you make excessive gains from exchanges, then no. If you lose from exchanges then yes. Rigged is a matter of perspective.

    The purpose of markets is to waste time dickering and haggling, rather than something more worthwhile.

    Since “civilization” arrived, markets take the place of warfare. The principles are the same, only those who make killings, do so legally even if the killing harms others. In other words, civilization is the pansies and wimps safe haven, as they use “the law” to do what was done for free long ago, hit one on the head and take their stuff and possibly their woman.

  • nveric

    Markets operate not for altruistic reasons, but to get more from whom one trades with.
    “Rigged” is open to interpretation. If you make excessive gains from exchanges, then no. If you lose from exchanges then yes. Rigged is a matter of perspective.

    The purpose of markets is to waste time dickering and haggling, rather than something more worthwhile.

    Since “civilization” arrived, markets take the place of warfare. The principles are the same, only those who make killings, do so legally even if the killing harms others. In other words, civilization is the pansies and wimps safe haven, as they use “the law” to do what was done for free long ago, hit one on the head and take their stuff and possibly their woman.

  • Nathanael

    Of course they’re rigged — as any 19th century investor knew. It doesn’t mean you can’t deal with them, but it’s very hard and requires paranoia as an investing style.

  • Blair T. Longley

    As usual, provides lots of good links,
    to answer its own rhetorical question.

    The previous comments concur the answer is YES.

    The problem is not the human nature to rig markets,
    but rather, the runaway triumphs of those doing that!

    The basic points should be based on deeper understandings of these problems, which tend to be non-starters within the current political situation, where the biggest bullies’ bullshit stories so totally dominate our society.

    ALL MONEY IS BACKED BY MURDER. All human “realities” are always organized lies, operating organized robberies. There is nothing new, EXCEPT for technologies becoming trillions of times more power and capable, including the scientific public relations, or professional liars’ brainwashing, of the the general public. Therefore, what is NOT new is that the markets are rigged. What is NEW is the degree to which that has become a runaway fascist plutocracy, in which a small oligarchy is getting away with transforming into being a new kind of royalty, which is more and more enjoying de facto impunity to operate above the rule of law, and therefore, are effectively destroying the rule of law. (Which becomes runaway insanities, that will eventually also drive themselves into madly self-destructive, vicious spirals.)

    The ONLY genuine solutions require better dynamic equilibria between different systems of organized lies, operating organized robberies. The current human ecology and political economy systems have become runaway social insanities, wherein the vast majority of people have become political idiots, which are too incompetent to use their own political power to resist being successfully defrauded an robbed, more and more, faster and faster.

    THEORETICALLY, we need a radical series of paradigm shifts throughout political science, in order to understand and respond to the ways that rigging markets has become so blatantly successful, and able to continue to operate above the rule of law, with relative impunity. However, the current situation is due to too much successful conditioning of the vast majority of people to be chronically afraid, ignorant, and apathetic, while the social systems around them are transforming faster and faster, in ways which are destroying several Centuries of previous achievements by their ancestors regarding the common law, and the basic operation of the rule of law.

    I WISH there was some good grounds to be more optimistic about this. However, this kind of story only tends to point out the direction we are clearly headed in, on a runaway trajectory. However, there are no good reasons to believe that the ways that the vast majority of people behave like Zombie Sheeple inside of this context is going to change significantly. I WISH I was wrong about that, however, so far, I have no good reasons to believe I am wrong. Instead, while I agree with this article, I currently can not believe in anything but that it is going to get way, way, way worse!

    WE ALREADY OPERATE INSIDE OF A VERY DEEPLY ENTRENCHED FUNDAMENTALLY FRAUDULENT FINANCIAL ACCOUNTING SYSTEM.

    THE MONETARY SYSTEM ITSELF IS TOTALLY RIGGED, AND HAS BEEN AUTOMATICALLY GETTING WORSE FOR MORE THAN A CENTURY IN THE USA, WHILE GETTING WORSE FOR MORE THAN A FEW CENTURIES IN THE REST OF THE BRITISH EMPIRE.

    The whole world’s economic system is already dominated by a global, privatized, electronic fiat “money” fraud, where our currency is created out of nothing, as debts, which almost completely corrupted governments to force all of their citizens to accept that fraud. We ALREADY operate within a monetary and taxation system which is a STATE RELIGION, built on faith-based “money,” which was the result of the triumph of the application of the methods of organized crime being able to take control over the government, and the mass media, and virtually all other social institutions whose control could be effectively bought.

    The kinds of the rigging of markets which are being manifest and proven today are simply the RUNAWAY RESULTS of triumphant organized crime taking over almost complete control of the already almost totally privatized powers of governments. In that context, the overwhelming vast majority of people have become too clueless to comprehend how clueless they truly are … That makes breaking through to sufficient understanding of these problems, enough to achieve adequate resolutions, appear practically impossible!

    • Warren Celli

      Good article. Great resource link!

      Blair T. Longley, excellent comments. You are the optimism. Keep speaking out. When the student is ready the master appears. You, as well as this web site, and millions of awakening others, will help dismantle and destroy the mass propaganda machine and at the same time provide the necessary lessons in the many different forms required.

      http://www.boxthefox.com/

      Deception is the strongest political force on the planet.

      • Blair T. Longley

        http://www.boxthefox.com/

        Just As Those In Power Write The History Books — Those In Power Also Write The Manuals Of Psychological Disorders…

        A few too many neologisms for my taste, but basically correct:

        “Economists and psychiatrists, peas in a pod — assigning subjective paper values to real world physical tangibles for parasitic profit.” …

        Deception IS the strongest political force on the planet due to the history of warfare.

    • Warren Celli

      Good article. Great resource link!

      Blair T. Longley, excellent comments. You are the optimism. Keep speaking out. When the student is ready the master appears. You, as well as this web site, and millions of awakening others, will help dismantle and destroy the mass propaganda machine and at the same time provide the necessary lessons in the many different forms required.

      http://www.boxthefox.com/

      Deception is the strongest political force on the planet.

    • Warren Celli

      Good article. Great resource link!

      Blair T. Longley, excellent comments. You are the optimism. Keep speaking out. When the student is ready the master appears. You, as well as this web site, and millions of awakening others, will help dismantle and destroy the mass propaganda machine and at the same time provide the necessary lessons in the many different forms required.

      http://www.boxthefox.com/

      Deception is the strongest political force on the planet.

    • Tonto

      Your analysis is spot on, except for the one blind spot your education has given you.

      The only reason the fraud and manipulation are so pervasive in our economy is because of the increased complexity surrounding the ever-expanding credit-economy. Most of this growing complexity has been created within my lifetime, credit cards, mandatory insurance schemes, the stock market in all its complexity, and, derivatives. Each of these financial inventions (and there are many included in each subset) have created —>more opportunitydismantle the complexityhumanscientific geniusScientific geniusmore opportunitydue to our human natureno geniusscientific genius<— flim-flam that has always gone on.

      Paul Krugman may have lots of academic certifications, but he's not fit to walk your dog.

      • Blair T. Longley

        Yeah, Tonto, the paradox I perceive is that the oldest and best developed social science was warfare, where success was based on deceits.

        Thus, our civilization is built on top of the hyper-complexities of triumphant frauds, backed by force. The scientific method was not immune to the deeper problems driven by the history of militarism, where being the best at dishonesty, backed up by violence, enabled those who did that to prevail throughout human history.

        The way I see it, there is an automatic rise and fall of the triumphant development of the complexity of societies based on deceits. The forces that back up the frauds can never make those frauds become true. However, the force can effectively wipe out the social opposition to the continued development of still bigger frauds. Since that runaway success of the frauds gradually become more and more further removed from realities which are being successfully lied about, by those who benefit from those lies, and thereby gain more social prestige and power, the whole system builds and builds its overall complexity upon rotten foundations.

        I agree with you Tonto, that I kind of have a “blind spot” with respect to that. However, I think EVERYONE does, since there are practically infinite tunnels of deceits, which are quite impossible to look to the bottom of … The old political problem of “Who will guard the guardians?” appears to have no good solutions!

        The guardians turn out to be those who were the best at backing up their deceits with destruction. As far as I know, there are no good solutions to that problem. “Science” has ended up primarily being employed to become better at being dishonest, and backing that up with violence. THAT PARADOX DRIVES COMPLEXITY TOWARDS COLLAPSE INTO CHAOS.

        As you said, Tonto, during our life time there has been an exponential increase of the basic fraud of “money” made out of nothing, as credit, with inventions like credit cards, etc., being developed to generate every possible excuse to make more “money” out of nothing. Thus, the basic financial fraud has enabled human beings to live as robbers in their environment, that have effectively robbed the future …

    • BDev

      Blair T – Nice response. You clearly have pondered all of this at length, as few can or will do. The sad part is that you, too, come to the identical conclusion: no way out.

      So, we have to jump up one level higher to see what is going on, en toto.

      If deception is endemic to all humans, and even all species (evolutionary psychology theories say yes, it is), and we can see that “Nature Works,” then there must be good reason for it. Nature has been experimenting and honing its processes for thousands of millions of years. Since nature works, then it is our default reference for deeper understanding.

      So, let’s say that deception is part of Nature, and of What Actually Works on this planet. How does deception fit into the greater evolutionary scheme of things? What advantages does deception provide? And what other character traits exist for victims to recover from deception? And what traits already exist to keep deception in check, in some reasonable balance?

      At the level of human self-aware (barely) consciousness, how does deception help the species? What are the checks and balances? And more importantly, how does one rise above it, in both awareness of it and elimination of it?

      These are the appropriate questions. Answers are to be found in the mental/rational realm, which is the next level up from the emotional realm. The rational will provide many answers to emotionally-driven paradoxes. Rational thinking, however, is not taught or cultivated in society. It is solely a personal affair. Thus, only a small percentage will be able to practice it and rise above the madness.

      That said, the mental/rational realm will also provide its own paradoxes, and one must go another level higher to see them clearly.

      And so it goes, infinitely interesting, exciting and awe-inspiring.

  • 2Timothy3

    Since satan is in control here on earth…not only would every market be rigged…but every human institution eventually becomes corrupt in some form. Christ is the only long term safe bet!

  • gozounlimited

    Just like the AP, IRS, Benghazi blippers of consciousness…. THIS administration has been aware of Domestic Oil Production, Fraud, Speculation, and Price-Gouging since developing the Oil and Gas Price Fraud Working Group two years ago. Again our AG is missing in action. Apparently the AG’s job is not to do his job….but to cover up fraud for the Pentagon, CIA, IRS, TBTF Banksters, Oil Co’s, and Corrupt Investors. Holder needs to resign before he brings down the Whole Teetering Obama Schabang…………. http://www.youtube.com/watch?v=cKbfJ8uUBro

  • Gas

    Thanks for such interesting report!!! Nice to read! getresearchpaper com

  • http://the-small-r.com/ The Small r

    To answer the original question: Ah, yep. Safest investment: Yourself.

    Great post.

  • D.D.B.

    The consumer market income from the U.S. Entertainment Industry has been stolen from the Investors by the government owned stores, these stores owned by Executive Branch departments like the U.S. Treasury, [responsible for federal law enforcement], the department of defense, [responsible for national security including U.S. law enforcement] and all of the rest have stores including the Commerce department. These stores are the internet stores that sell movies, music CD’s and MP3 downloads, fiction and non-fiction books, and magazines. They are also grocery stores, malls, banks and every store that sells manufactured goods. They may claim that its part of the MLM movement active inside the U.S. but I believe they have stolen the motion picture income since 1947. Several million writers, producers, actors and musicians petition the U.S. Government through the U.S. Treasury departments of FBI, [IC3], and the IRS for criminal complaint against the stores each year with each new published production. These departments report that there was no income of sales for the motion pictures, rock albums and novels. Appeal to the U.S. Congress reports the same thing and drops the petition. The U.S. Supreme Court is unapproachable. If any of the criminal complaints is real and has been turned away then U.S. Citizens have lost their First Amendments Rights to petition grievances. This leads to recognition that the Executive Branch and the Congress are in fact several Organized Crime Rings with the U.S. Treasury taking money from each to allow banking and bank transfers such as off shore banking. The amount of money is in the Trillions and I counted the income from the three most popular sites on the internet and it came to $2.25 Trillion dollars in sales for the year counted. I’m sure each of the three have nearly 100% new publishing criminal complaints against them. Finally Independent Producers and Publishers report that starting your own internet store web site will not bypass the Organized Crime problem. That the bank that handled the sales transfers reported no sales or transfers, even though the transaction counter report sales.

  • Ivan Ivanovych Lukyanchuk

    Thanks for such interesting post!!! Nice to read!
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