Justice Department Says BP Manipulated U.S. Propane Prices
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BP Plc, Europe’s largest oil company, cornered the propane market in northeastern America, driving up prices and seeking an illegal $20 million profit, the U.S. Justice Department and Commodity Futures Trading Commission said.
The commission filed suit today in federal court alleging BP Products North America, a subsidiary of London-based BP, manipulated the market for the heating fuel in February 2004 after trying the same tactic in April 2003. Former BP trader Dennis Abbott pleaded guilty to conspiracy in a separate court filing yesterday by the Justice Department.
“Cornering a commodity market is more than a threat to market integrity,” the director of enforcement for the commission, Gregory Mocek, said in a statement. “It is an illegal activity that could have repercussions for commercial market participants as well as retail consumers around this country.”
BP is one of several large oil companies facing increasing scrutiny from the government as energy prices surged. The company has also run afoul of American regulators in the past year over operations at its refineries.
By purchasing “enormous quantities” of propane, BP caused the price to increase to more than 90 cents a gallon on February 27, 2004, “a price that would not otherwise have been reached under the normal pressures of supply and demand,” the commission said in a statement. The company at one point owned over 88% of all “TET” propane, fuel that can be delivered anywhere on the Texas Eastern pipeline system.
The strategy was done “with the knowledge, advice and consent of senior management,” the commission said. BP also tried the strategy in April 2003, as a “trial run,” according to the market regulator.
Mr. Abbott, who faces five years in prison and $250,000 in fines, was recorded on company phones in April 2003 telling another trading employee, “Dude, you’re the entire [expletive deleted] propane market,” according to the commission’s lawsuit. Telephone conversations are recorded to keep track of deals among traders.