May 17, 2020

Biggest Oil Market Manipulation Lawsuit in History

Oil
Markets
commodities
manipulation
Admin
2 min
The U.S. is suing two big oil trading firms and well known traders for market manipulation.  New regulations are likely to ensue.
One of the biggest oil market manipulation investigations in history is being undertaken by U.S. regulators this week. Two well known energy commodity...

One of the biggest oil market manipulation investigations in history is being undertaken by U.S. regulators this week.  Two well known energy commodity traders and two trading firms owned by Norwegian billionaire John Fredriksen are being sued for allegedly squeezing oil markets and making $50 million in 2008.

Traders James Dyer of Oklahoma’s Parnon Energy and Nick Wildgoose of Europe’s Arcadia Energy used their key positions within the U.S. trading sector to manipulate the oil market.  By impressing tight supplies to boost oil prices, then subsequently dumping those “lost” barrels back into the market, prices crashed and the traders raked in huge profits from short-sale positions held in future markets.  The two traders reportedly stopped their illegal activity in April 2008 after regulations increased and investigations began sweeping the commodities trading sector.

"Defendants conducted a manipulative cycle, driving the price of WTI (crude) to artificial highs and then back down, to make unlawful profits," the lawsuit filed in New York said.

"This is a very big deal in that we seldom allege that the defendants manipulated the crude oil market to the tune of $50 million in ill-gotten gains," says Bart Chilton, commissioner of the Commodity Futures Trading Commission (CFTC).  "That's an awful lot of money, and when we look at how consumers are suffering at the gas pump, we need to prosecute activity like this to the fullest extent of our authority under the law."

Oddly enough, the two traders being sued—Dyer and Wildgoose—both worked as traders for BP Plc in the early 2000s.  This was the same timeframe that British Petroleum (BP) was fined a record $2.5 million by the New York Mercantile Exchange for manipulating U.S. oil markets. 

The lawsuit being pursued against Dyer and Wildgoose, as well as Parnon Energy and Arcadia Energy, says that the CFTC may seek damages of up to triple the monetary gains illegally accrued—roughly $150 million. 

So there you have it.  While it’s easy to point the finger at the big oil companies raking in the profits, more often than not it is shady, dishonest traders who set the price of oil (with the exception of BP apparently).  In fact, the very idea of oil—which people are so dependent on—being traded as a commodity should be called into question.  Instead of relying on true supply and demand, we as consumers are left at the mercy of traders.  And if you can point out a single trader who isn’t solely concerned with lining their pockets with as much cash as possible, then you’ve found the proverbial “needle in a haystack.” 

Share article

Jul 26, 2021

Ofwat allows retailers to raise prices from April

Ofwat
Utilities
water
prices
Dominic Ellis
3 min
Ofwat confirms levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue

Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.

The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.

Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.  

In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue. 

Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”  

There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:   

  1. Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps. 
  2. Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold. 
  3. Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice. 

Further consultation on the proposed adjustments to REC price caps can be expected by December.

Anita Dougall, CEO and Founding Partner at Sagacity, said Ofwat’s decision comes hot on the heels of Ofgem’s price cap rise in April.

"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.

"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."

United Utilities picks up pipeline award

A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.

The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.

“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.

Camus Energy secures $16m funding

Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent VenturesWave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.

As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.

Share article