Price Fixing on Oil?

I wanted to talk a little bit about the continuous investigations about alleged price fixing in the energy sector. The alleged price fixing has been a hot topic for decades and the recent events are causing it to steam up again. It is also a reason for the huge push to alternative energies since the cost of crude oil and gasoline is getting so expensive. Now who really controls the price of barrels of light sweet crude and other fuels?

Most fuels are traded on the open market in futures. These futures are something that helped Southwest Airlines post massive profits while most other carriers were losing billions of dollars annually and even forced some into Bankruptcy Court (United, US Airways, Delta, Northwest & Aloha). Southwest was able to buy futures in heating oil (as it's the closest cost match to aviation fuel) and purchase it for a cheaper price. As prices began to increase after 9/11, they still had the contracts for the cheaper fuel thus reducing their overall expense.

Many people still believe that the oil companies set the price and that the open futures market does not. Evidence of Price Fixing by Oil Companies? By Guy Cramer
Now this report may not be scientifically conclusive as it only suggests that by the trends (of the price for futures) that there is price fixing going on.

Another reason that has fueled more speculation and that has got the involvement of many government agencies is the overall profit that the oil companies are posting. ExxonMobil even posted that largest profit ever to be reported by a US publicly traded company ever:


With profits for the four largest energy companies reaching nearly $100B annually as of 2006, it makes people wonder if price fixing is happening.

In 2005, the Bush Administration was asked by eight (8) state leaders to investigate oil pricing in the aftermath of Hurricane Katrina as oil spiked to over $90 a barrel which had been hovering around $65 a barrel prior to the catastrophic event. CBS News


In February of 2006, the Supreme Court ruled against the gas distributors who filed a class-action lawsuit against ChevronTexaco & Shell Oil Co saying that their partnership, while appearing to be anti-competitive in setting prices, was not illegal. Ruling

So as we can see, this has been a huge topic that has many people, from individual citizens to government agencies, acting on the potential threat of price fixing for our world's necessary fossil fuels. All in part driving the development and use of alternative fuels to help reduce the out of pocket expense and reduce emissions.

More to come...