The Mail explains how the old scam works

Here’s how they might do it: if a trader at a major oil firm bought a million barrels of oil at, say, $100 a barrel, there appears to be little stopping him reporting to Platts that he actually bought the oil for $100.10 a barrel.

Then, if he’s colluded with enough of his trading competitors to deliver similarly inflated prices, Platts will, in good faith, report that oil is being bought and sold at a higher price than the one it is really being traded for.

Of course, the increase in the Platts benchmark figure will be less than 10 cents a barrel because most traders report accurate data, and an average figure is arrived at.

Still, the increase, even if it is only a few cents, could lead to massive profits if the trades are big enough.

Umm, yeah, but no, but yeah.

Where\’s the profit? What\’s the mechanism by which someone profits from doing what is described above?

No, I understand about moving futures positions etc: but he\’s not mentioned any of that. He\’s saying that misreporting leading to the benchmark rising automatically produces a profit. What?

The traders\’ books will be judged after they sell what they\’ve bought: so it will always be real market prices, not the benchmark, that determine their perceived success.

The AA has published a report claiming that speculators are using an age-old trick to make a fast buck at the expense of Britain’s 33??million motorists.

Traders working for major commodity-dealing firms are said to have been buying up vast amounts of oil with a view to making a large profit when they sell it. They do this by refusing to release the fuel onto the market and, in so doing, force a squeeze in supply. That inevitably pushes the prices up.

Dear God.

I think I\’d pay a little more attention to someone who was able to spot the difference between oil and fuel myself.

6 thoughts on “The Mail explains how the old scam works”

  1. Quite. Refineries pay market rates for crude oil, even if they’re buying from their own company. Likewise upstream operations buys lubricants and fuel from their own refineries at market rates. The only advantage the refineries enjoy from the arrangement is that the supplies are guaranteed, i.e. they’re not left having to shop around for shipments on the open market.

  2. So, 0.1%, at worst? Even if it did affect prices, that’s what, 6p on a tank?

    In my lifetime, that will never match the amount of money the government took from me for the Olympics.

  3. Looking at oil-price.net to my eyes the oil price has been pretty much stable at +/- 95 USD for 5 years. Sure there have been ups and downs but over the period, pretty stable. So, how do they explain that ‘speculators’ have been oil-rigging for that span. to work, a steadily increasing trend would have to be seen, otherwise they’re just running the usual risks in a flat market.

  4. Note that the article’s author, Geraint Anderson, is the author of “Cityboy: Beer and Loathing in the Square Mile”, a purportedly factual description of his drug-fuelled time as a utilities research analyst with various major banks across London. It was certainly an entertaining read, but I suspect it played rather fast and loose with the facts.

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