Oil market harder to oversee, EU official says

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Oil market harder to oversee, EU official says

Oil markets are more difficult to regulate than power and natural gas because they need international rules to govern trading across continents, according to the top aide to European Union Energy Commissioner Guenther Oettinger.

While preventing abuse in power and gas markets is easier because trade in those commodities rarely extends overseas, oil presents a bigger challenge and is too diverse for a single body to monitor effectively, said Philip Lowe, the director general for energy at the European Commission. The bloc’s competition arm is investigating potential price manipulation in crude, refined products and biofuels transactions.

Oil markets “are globally traded, with major participants established throughout the world,” Lowe said in a phone interview from Brussels July 3. “Isolated EU-level monitoring would be incomplete, and the rules, if established for misconduct, would be unenforceable without reciprocal arrangements of monitoring in other countries.”

Antitrust officials from the EU’s competition arm raided Royal Dutch Shell, BP, Statoil and energy news and price publisher Platts in May to investigate allegations of price manipulation and collusion by traders in crude, refined-product and biofuels markets. The probe marks the third time global pricing benchmarks have drawn regulatory scrutiny in the past year following investigations into bank manipulation of the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market.

Electricity and gas are mostly traded on a national or regional basis because they aren’t as easily stored or transported, whereas oil is shipped around the globe to reach consumers. Europe was the biggest importer of oil last year, according to BP’s Statistical Review of World Energy, attracting 618 million tons of crude and refined products combined, or 23 percent of global imports.

The Regulation on Energy Market Integrity and Transparency, or Remit, in December authorized a pan-European group of regulators to monitor power and gas markets, without extending similar requirements on oil. The rules oblige companies such as Total SA and EON SE to publish data on planned and unplanned outages of plants generating more than 100 megawatts and major interruptions in gas supply.

“Remit regulation aims to tackle markets on which we have a direct hold,” said Lowe, who took over as the top civil servant in the Commission’s energy arm in February 2010 after serving in a similar role as director general of competition for more than seven years.

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