Libor in a barrel - oil price rigging scandal | Small business blog

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Libor in a barrel - oil price rigging scandal

By Rob Downes - 17 May 2013

Few this week will have missed the big story oil magnates Shell and BP – and others – are under investigation over allegations of price fixing.

These kinds of stories always generate plenty of column inches simply for that fact that oil, simply put, makes the world go round. It is the lubricant of economies the world over, from the biggest, to the smallest. Virtually everyone, everywhere, has a vested interested in what market prices are doing.

In particular though, businesses are affected more than most when pump prices are high, and particularly here in the UK, home to one of the most expensive pump litres in Europe, the burden is markedly more onerous

So this is serious stuff, and if these price rigging allegations are found to be true, then it’s a scandal on par with the Libor or bank swaps scandals. No wonder the PM has said jail beckons for any trader found to be complicit.

Post crash, rocketing pump prices have blighted the UK and put a massive hole in the finances of many small businesses, particular those who rely heavily on fuel. If you’re a delivery firm with a fleet of white vans to fill everyday, even small price hikes rapidly mount up. Pre-crash, fuel was around £1 a litre, now it’s risen by around 50%. High fuel prices also hits consumer spending – the less families have in their pocket they less they spend on other things.

It’s no surprise the number of our members who have taken up our fuel card offering has shot up in recent years. While one member who found his business saving more than a thousand pounds a month may be grateful, most would elect for a fair, honest price at the pump.

We know fuel costs weigh like an anchor on small business growth, especially for those firms who rely on fuel to trade, which is why this will irk so many. But it’ll be those businesses who’ve been forced to shed staff most aggrieved.

This latest investigation by the EU will also raise questions around the OFT’s investigation last autumn. Critics are already saying their operation was limp-wristed, although it’s really too early to say that, but it will be interesting to see how this plays out and adds an extra layer of interest to this rumpus.

The point though that few commentators have made though, and this is pretty crucial, is that price fixing can work both ways. Traders make money on price movements, not on high pump prices, and so fluctuations down as well as up work just as well for the rogue trader out to make a dishonest buck.

For more information about our fuel card telephone us on 0845 130 1722.

Tagged with: BP, fuel prices, Oil prices, Shell