U.S. Launches Investigation Into Price Rigging In Oil Markets

A month after European Union officials raided three fossil fuel companies as part of an investigation into price rigging in oil markets, American authorities have opened their own parallel effort. Bloomberg reports the Federal Trade Commission’s (FTC) investigation is likely to merge with European efforts in the future.

The investigations center traders manipulating oil markets, who voluntarily report the data used to establish the commodity’s price. Price rigging can juice profits for the insiders involved while hurting consumers worldwide in far-reaching ways. The price of oil drives the price of almost every other commodity, and food costs are especially sensitive to fuel prices. The investigation is new, but the rigging behavior is apparently widely known, with one former trader calling it “an open secret within the oil industry.”

While Sen. Ron Wyden (D-OR) had requested an inquiry by the Justice Department, the FTC’s role signals authorities have decided the conduct in question is not criminal.

Price rigging is not unique to fuel markets. Financial insiders are able to fix prices in a wide range of transactions, from largely unregulated foreign exchange markets to heavily scrutinized short-term borrowing among large banks. In each case, the manipulation enriches traders in the financial sector at the expense of consumers in the broader market. And as finance expert Barry Ritholtz has noted, there’s good reason to think such price rigging goes on in other commodity markets like gold and silver, as well as more ephemeral ones like the market for complex financial bets known as derivatives.