BP manipulated propane price, feds say
WASHINGTON — 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.
The Environmental Protection Agency launched an investigation into a March crude-oil spill at one of its Alaskan facilities and it faces victims’ lawsuits stemming from a deadly explosion last year at its Texas City, Texas-based refinery.
Earlier this week, a group of prominent black leaders including the Revs. Jesse Jackson and Al Sharpton announced a boycott of BP, saying the company gouges consumers and racially discriminates in its business practices. The company was targeted, Jackson said, because none of its upper-level executives are black and there are no black owners among its hundreds of U.S. distributors.
The alleged price-manipulation conspiracy generated sharp criticism from experts and politicians.
Senator Charles E. Schumer (D-N.Y.) said that “if these charges are true, it shows the worst of big oil … consumers deserve free markets that reflect true prices.”
Robert G. Hansen, the associate dean at Dartmouth’s Tuck School of Business, said it appears that “a corporate management failure occurred at BP” and that, with energy markets facing such a high level of scrutiny from the public, “management has to have the utmost control of their trading groups.”