“Enron Corp.’s 2001 collapse revealed the extent of its manipulation of spot gas prices. Twelve years later, European Union regulators may discover energy traders never learned the lessons of the scandal.
BP Plc (BP/), Royal Dutch Shell Plc (RDSA) and Platts were visited by EU inspectors last week over allegations they “colluded in reporting distorted prices” to manipulate the published prices of oil and biofuel products, the European Commission in Brussels said after the raids.
Shell, London-based BP and Statoil ASA (STL), three ofEurope’s biggest oil explorers, are under investigation for potential manipulation of prices in the $3.4 trillion-a-year global crude market. The involvement of McGraw Hill Financial Inc. (MHFI)’s Platts, which publishes pricing data, hearkens back to other pricing scandals including Enron, and more recently, Libor.
“We’re making exactly the same mistakes we did with Enron, just with a different commodity,” Robert McCullough, an energy consultant, said by telephone from Portland, Oregon. “The same manipulation we saw in electricity and gas pricing is what we’re seeing in oil.”
The Enron scandal started in 2001 as traders used trading strategies called “Fat Boy” and “Get Shorty” to create phantom congestion in the California energy markets. Electricity prices rose 10-fold on average and California consumers endured days of rolling blackouts.