Emerging economies hardest hit if oil price manipulated

open | 27 May, 2013

Rising oil prises have been especially painful for emerging markets economies - and in particular for those with fuel subsidies.

So European Commission's (EC's)  raids against offices of oil companies in the Netherlands, the UK and Norway, should please those emerging- and developing economies who carry a larger load for as long as oil prices are historically high.

The EC must have had reliable tips that oil companies colluded to manipulate the oil price on the screens of Platts – which are used in most oil contracts around the world. And is therefore expecting to find data that would prove these oil firms have manipulated the global price of oil, of oil products and biofuels.

UK’s BP, Royal Dutch Shell, Norway’s Statoil and the pricing firm Platts all had to hand over files.

Among emerging economies with subsidies in place and with more then to loose are India, Indonesia, Nigeria, South Africa and other Southern African Custom Union countries like Namibia, Venezueula and Mexico, plus a number of oil economies in the Middle East like Saudi Arabia. Iran and Iraq.

Manipulation to the upside only adds to the pain. Producer countries, on the other hand, have seen income rise drastically, and with it, in many cases, corruption by officials.

The EC decided to act because price manipulation can have cost the consumer. Lawyers think a whistleblower could have tipped off the regulators. After the raids, the EC questioned all major international trading houses, including Vitol, Glencore, Mercuria and Gunvor, which are known for their flexible arrangements.

The latest investigation is part of a trend. The EC has become serious about manipulating prices of key benchmarks after the Libor scandal in which banks colluded on interest rates.

Ultimately, banks paid some $2 billion in fines. Betting on a similar outcome with oil, one Chicago-based fund already has sued all oil firms under scrutiny.

Meanwhile oil traders are angry with the EC probe and claim that regulators have little knowledge of the oil trade.

For sure, the physical trade is an opaque and complex world with many moving parts that can ultimately define the price, such as the quality of the oil, the available volume, the location or the time of loading.

Market analysts agree this will be a steep learning curve for the EC but point out that traders attempt to influence the oil price at all times, both up and down – whether that is collusion is another matter.

The EC is limited to probing the spot market of oil, the so-called Platts window, where the spot price of oil is set.

Importantly, this spot price takes its lead from the electronic commodity exchanges such as Nymex in New York and ICE in London.

However it is in the equally poorly understood futures market where the actual price of all is set. The spot market trades around the futures price. Traditionally, the spot price of Brent in London is trading in a band of roughly $5 around the Brent futures price, which itself is the result of fundamental oil supply and demand, but increasingly the outcome of financial factors and geopolitics.

The EC is right to investigate the spot market, but should also look at the complex futures market. In the US, the Commodity Futures Trading Commission (CFTC) is doing just that. Within hours of the EC raids, the CFTC questioned banks in the US about the legality of their use of oil derivatives. Officials say there is no link between the two probes, although the timing suggests otherwise.

Most attention is on the EC investigation. For the public, the outcome of the US probe can have much bigger consequences. Interestingly, the CFTC’s probe includes a number of banks that were involved in the Libor scandal.

What the next step can be obviously depends if the EC raid finds anything that sticks. And if they do those economies that feel they have suffered from possible manipulation may also take their case too courts.

Related articles

Related advertorials


Apartheid era oil storages fill up as US cuts import from Africa

open | 19 March, 2014

Africa, strategic oil:

South Africa must look to increase its refining capacity

open | 09 March, 2014


Brazil's surprise jetfighter decision sets scene for reduced superpowers control over arms trade

open | 17 January, 2014

> ARMS DEAL-FRAUD INVESTIGATION: Saab's agent in South Africa under investigation by British Serious Fraud Office
> ARMS: Saab negotiates multi-billion deal with Denel - Africascan update
> Saab touted as possible replacement for Boeing in India's prestigeious Tejas domestic jet fighter project

The phone directory app that gets India talking

open | 14 October, 2013

Digital change:

Reporters without quotes

open | 08 October, 2013

Obama Power to the People

subscriber | 13 July, 2013

Obama-Africa energy

Power to the people

open | 03 July, 2013

> Emerging economies hardest hit if oil price manipulated

Spys and donors

open | 16 June, 2013


African answer to US shaling revolution

open | 06 June, 2013

> Emerging economies hardest hit if oil price manipulated

The UN post-2015 report - new targets, less pain, new gain

subscriber | 31 May, 2013

Norway's pension fund under fire from OECD for human rights failure

open | 31 May, 2013

Bill's pill's - the Gates Foundations' upbeat report card on poverty

open | 07 April, 2013

Top-down, down-up

Setting free the bears in the 'digerati' circus tent

subscriber | 03 April, 2013

BAE-Saab arms deal:

New evidence links SAs former chief of staff to jet fighter commissions

open | 05 December, 2010


open | 04 February, 2010

The US Administration's "certification" of India's signing of a safeguard agreement with IAEA February 1 does not only mean that civil nuclear co-operation with India is cleared by the administration. It means that the US chances to sell F-16/18 jet fighters to India increases.

> RISK ANALYSIS: These are the pitfalls in Swedish outsider Saab's bid to win India's $ 12 billion jetfighter deal

Sweden turns to its royals and the sound of ABBA to get through to India's decision makers

subscriber | 19 October, 2008

Gripen inquiry reopened in SA?

subscriber | 24 March, 2008

The National Prosecution Authority in South Africa has reopened an inquiry into allegations of possible financial irregularities by deceased former defense minister Joe Modise and his entourage linked to the Gripen/Hawk jetfighter deal, claims Johannesburg investigative newspaper Mail & Guardian. A ScanView commentary states that Swedish prosecutor Christer van der Kwast has so far not confronted Saab with central corporate governance questions.

Mozambique eyes Norway for clues how to handle possible natural resources windfall - oil companies expect to find oil

subscriber | 09 December, 2007

Confidence is on the rise in Mozambique as natural resources projects are coming on stream and the economy continues to grow fast from a low base. Legal wrangling and a need for political protection are major hurdles for broader investments.

Biofuel in Africa - not an easy stroll in the sugar cane field for Swedish hopefuls

open | 08 December, 2007

South Africa turns down EU-SADC trade deal ahead of Lisbon summit

subscriber | 07 December, 2007

Nordic sugar giant Danisco makes niche investment in South Africa

subscriber | 09 July, 2007

The Swedish Prosecutor considers but hasn't yet decided to investigate Gripen sale to South Africa

open | 28 February, 2007

RETAIL INDUSTRY-ANALYSIS: Retail boom could lure the likes of H&M, IKEA, Elgiganten and Fona to Africa

open | 11 December, 2006


Chinese offensive in Africa causes dilopmatic distress

open | 15 November, 2006


Don't expect Africa to take the lead on emissions - the West must show the way

open | 28 October, 2006


open | 17 May, 2006

SOUTH AFRICA's democracy 10 years:

The story of the Madonna of Excelsior - same God, separate churches

open | 07 April, 2004

EXCELSIOR. In the small conservative farming community Excelsior material life is undoubtedly better after ten years of democracy. But the invisible hand of apartheid, ingrained racism and widespread poverty makes everyday life not so different from that of life during the apartheid era.



subscriber | 29 October, 2012



subscriber | 15 February, 2010


Brazil air force favors Saab’s Gripen

subscriber | 06 January, 2010

GENEALOGY: South African town battles over divisive Swedish 'colonialist'

open | 07 January, 2008

Here is a riddle for you. He was one of the leading South African 'voortrekkers'. A little town in South Africa's northern province of Limpopo is named after him. The municipality thinks this fellow was a 'colonialist' and that the old town name therefore is controversial. Few know of his Swedish roots - his Swedish name was Trägårdh. His family is one of many Nordic family names that live on in South Africa. So who was he?

Underperforming Sweden-South Africa matchmaking fund to be wound up

subscriber | 31 March, 2006

A government run Sweden-South Africa risk capital fund will be closed due underperformance. The fund has spent SEK 65 million since it was launch during a visit by Prime Minister Göran Persson in November 1999.

AID-DEBT RELIEF: For a song! - Denmark to write off €437 million to Africa

subscriber | 31 January, 2006

Denmark´s Development Minister, Ulla Tørnæs is singing along with rock icon Bono and promises to write off € 437 million to Africa´s poorest countries. Debt relief activists are not impressed.

AID-DEVELOPMENT: Nordic aid agencies want prosecutor to investigate funds linked to murdered journalist

subscriber | 24 January, 2006

In a new twist Nordic aid agencies want the Mozambican state prosecutor to investigate funds which, certainly in the public mind, are linked to the murder of journalist Carlos Cardoso, according to Africascan´s information.

AID-DEVELOPMENT: South African truck drivers living dangerously - update

subscriber | 15 January, 2006

AGRI INDUSTRY: Yara gave controversial price to Ethiopia´s president, won € 12.5 million worth of contracts

subscriber | 15 January, 2006

What correlation is there between giving Ethiopia´s Meles Zenawi Norwegian fertiliser company Yara´s prize and being awarded a multi-million contract in Ethiopia a few months later, asks a Norwegian watchdog.

FORESTRY INDUSTRY: Swedish forestry investor hit by byzantine rules and racism in Mozambique

open | 15 January, 2006

Just about everything that could go wrong did so, when Swedish investor Mikael Salin invested in Mozambique, but the company now seems to have turned a corner.

AFRICASCAN COMMENT: An old brothel in need of TLC has found its saviour

subscriber | 20 December, 2005

Slightly less corruption in Africa - but how about those who pay the bribes?

subscriber | 13 November, 2005