Petrol prices are calculated from data collected from oil companies and banks. But a new report suggests that the data collection companies may have received distorted information from traders intent on profiteering from lax regulation. The impact on ordinary people could be massive.
Pump prices are linked to retail benchmarks that are deployed when paying for future supplies. These benchmarks are calculated from information sent daily from bank, hedge funds and energy operators. Crucially, this arrangement is completely unregulated, leaving the possibility of some companies submitting misleading information.
Ripped off - again?
A G20 report from the International Organisation of Securities Commissions (IOSCO) claims traders have the chance to distort the true price of oil in order to rack up their own fees - an arrangement not dissimilar to the Libor scandal.
Platts and Argus, the two main price reporting players, claim any whiff of data dishonesty is weeded out. But there is a conflict of interest at play - these reporting agencies are also paid by oil companies and banks to disseminate this information. Both companies, when called, were unavailable for comment.
Speculators blamedEqually there's also considerable worry about commodity speculation - where the price of fuel is driven up artificially by traders. "On Tuesday before last," AA spokesperson Luke Bosdet told AOL Money, "the price of petrol in North West Europe went up 2.5p a litre in one day because one commodity speculator bought every single cargo of unleaded. On that day there was four cargoes of unleaded offered to the market."
He went on: "The simple fact of matter is that gambling on commodities is being done to a huge extent it's now causing huge problem for economic stability. Big companies can hedge against these surges, your typical small business which buys fuel to power their vans cannot."