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Investigators suspect oil price manipulation

NEW YORK — When a BP rig exploded in the Gulf of Mexico in 2010, Richard Fry, a top executive at a trucking company, said he noticed something strange about the oil market. Prices spiked quickly, he recalled, and they took much longer to drop.

“It is too coincidental that companies’ prices all go up the same and all come down very, very slowly,” said Fry, who buys large amounts of fuel for his company, Framptons Transport Services.

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European authorities are also worried about the forces behind the market.

On Wednesday, the European Commission ramped up its inquiry into the potential manipulation of oil and biofuel prices, as investigators continued to question BP, Royal Dutch Shell, and Statoil about their trading activities, according to people with knowledge of the meetings. Regulators, in part, are focused on a pricing system operated by Platts, a unit of the McGraw-Hill Cos.

BP and Royal Dutch Shell said they were cooperating with the investigation. Statoil did not return calls for comment.

Authorities face a daunting task. Much of the global oil trade occurs away from regulated financial exchanges, as firms and traders buy and sell billions of dollars of crude oil each day and ship it around the world.

Agencies like Platts and Argus Media establish prices by phoning and messaging traders. Platts supplements that information by tallying up the bids and offers submitted to an internal trading system.

Consumers and companies are heavily reliant on the market, which affects the price at the pump, as well as the cost of airfares and supermarket bills.

A refinery, which turns crude oil into products such as gasoline and diesel, might use a Platts price as a reference for the crude oil it buys to run through its system. The refinery then turns the oil into gasoline, which is sold to consumers and companies.

Meanwhile, BP is seeking to stop paying millions of dollars in what it calls spurious compensation claims stemming from the 2010 oil spill.

The company warned Thursday that the excessive claims are jeopardizing its financial prospects. It has sought an injunction in US courts, arguing that Gulf coast businesses are pursuing multi-million dollar claims for “nonexistent, artificially calculated” losses.

The disaster caused extensive damage to the fishing and tourism industries. The company earlier agreed to pay billions of dollars in compensation but now seeks to halt what it feels are unjustified claims.

Material from the Associated Press was used in this report.
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