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Price Manipulating?

Mike

Well-known member
BP Charged With Price Manipulation
ap ^ | Thursday June 29 | By Brad Foss, AP Business Writer

Posted on 06/29/2006 5:14:48 AM PDT by Flavius

WASHINGTON (AP) -- Detailed allegations by federal investigators that BP traders illegally manipulated propane prices in 2004 could hurt the oil and gas industry's image at a time when consumers and Congress are upset about soaring energy costs and record profits.

Executives from BP PLC and other major oil companies have testified before Congress and stressed in TV interviews that today's sky-high prices for gasoline and other fuels are the result of market forces beyond their control -- not improper behavior on the part of industry.

"Well, that's going to be a tough sell when you have headlines showing that they caught you manipulating the market," said Phil Flynn of Chicago-based Alaron Trading Corp.

Even though a nine-month probe concluded last month by the Federal Trade Commission found no widespread effort by the industry to inflate gasoline prices, Flynn said "everybody is going to use this one incident as proof positive that the big oil companies are manipulating every market. It's going to be guilt by association."

The Commodity Futures Trading Commission said Wednesday that BP traders -- with the consent of senior management -- "purchased enormous quantities of propane to establish a dominant" position in the market and then withheld fuel in order to drive prices higher.

Details of the alleged scheme, compiled with help from internal company documents and recorded conversations, were outlined in a civil lawsuit the CFTC filed against BP Products North America Inc., a Warrenville, Ill.-based unit of London-based BP PLC.

BP denied any wrongdoing, but a former employee admitted taking part in a conspiracy and agreed to cooperate with criminal prosecutors.

BP has faced considerable negative publicity in the past year.
 

Econ101

Well-known member
Sounds a little like what Enron was doing. Unfortunately, the politicians have allowed regulators to become so unable to do their jobs that this sort of thing can and will happen again.

Energy companies and in particular, companies that deal with markets that are inelastic (meaning the price change does not bring the corresponding change in quantity demanded).

I wouldn't go as far as to say oil companies (or Tyson) are in complete control, but the control they can and do abuse is not always being caught by the regulatory agencies and in most cases they just get the equivalent of an unforced "parking ticket" without really having to pay for the costs they incurred on the market.

It is like catching robber at a 7 eleven and telling him, "We know we caught you red handed stealing that $391.00 from the clerk but if you promise to not do it again, you can keep the money".

Our politicians are not governing properly to allow such things to happen. They are not giving the enforcement power to the regulatory agencies to inflict actual economic penalties on the abusers equal to or greater than the economic damage they created on the market.

It is the Mexicanization of our system.
 

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