Besides, the Working Group, at the fourth session (October 2012, London), researched the issues of price formation in the world markets and impact of world prices on wholesale prices in the national markets for oil and oil products. For this purpose, participants of the Working Group visited the headquarters of major world PRAs Argus and Platts, and also the Intercontinental Exchange (ICE). In London, the Working Group had detailed discussions of the principal aspects of oil and oil product pricing in the world markets, of mutual influence of the physical oil and oil product markets and the derivatives market, of independence of pricing institutes, of transparency and validity of methodologies and procedures of assessments, and other issues.
World prices have an impact on prices in national markets, both of large and small countries, and both of importing countries and exporting countries.
As for the experience of Portugal's Competition Authority, according to the multivariate comparative analysis of the oil and oil products market in the countries of the European Union, there is an asymmetry of international and domestic prices in most EU Member States. Upward trends are broadcasted from world markets to domestic markets without any delay, and with a high degree of correlation. Downward trends are broadcasted from international markets to domestic markets with delay and with a lower degree of correlation.
From the experience of the Austrian Federal Competition Authority (FCA) gained from the study of the effect of Platts’ valuation on pricing in the oil market of Austria, there are some problems concerning the reliability of benchmarking by the Price Reporting Agencies (PRAs), including:
- insufficient data sampling for price analysis and reflection;
- a higher proportion of VIOC’s over independent traders in data sampling;
- informal qualitative judgments about prices (an element of subjectivity).
These conclusions correlate with the ones of the International Organization of Securities Commissions (IOSCO).
The Russian Competition Authority also has experience of developing trade of physical oil products at the exchange. The FAS Russia prescribed to VIOCs to sell at least 10% of physically traded volumes of oil products in the domestic market at an exchange in the procedure established by special provisions of the Law on Protection of Competition. In accordance with the Law on Organized Trading and the Act of the Government of the Russian Federation, any OTC transactions made by large VIOCs shall be registered. The volume of registered transactions in Russia exceeds volumes of transactions reported by Platts at 8-10 times. Thereby, a reliable benchmarking of the exchange and off-exchange prices is received.
In Russia, the market price level is determined on the basis of exchange quotations on a physical commodity, indices of the OTC prices under registered contracts, and prices of the comparable foreign markets. The cost of oil and oil products in the domestic Russian market are estimated by three large PRAs Platts, Argus and CORTES, and the exchange Joint Stock Company “St. Petersburg International Mercantile Exchange” (SPIMEX).
The Working Group on Investigating Issues on Pricing in the Oil and Oil Product Markets and Methods of their Functioning (“The Oil Working Group”)
4-5th October 2012
London, the United Kingdom
1. Presentations and Discussions:
1.1. The subject of this session of the Oil Working Group was the pricing in world markets and the impact of world prices on wholesale prices in the national markets of oil and oil products.
1.2. This session was held in the form of meetings and discussions between the members of the Working Group, as set out in these Minutes, and representatives of international information-analytical agencies “Argus Media” and “Platts, The McGraw-Hill Companies Inc.”, as well as the exchange platform “Intercontinental Exchange” (ICE) (hereinafter - the “Companies”);
1.3. The Companies’ representatives made the presentations (attached hereto in English) on the subject of the session, as set out in Paragraph 1.1 of these Minutes, and spoke about the activities of Companies;
1.4. During the session the following topics were discussed in detail:
1.4.1. pricing transparency in oil and oil products markets;
1.4.2. independent functioning, and, at the same time, the mutual influence of the physical trading in oil and oil products markets and the trading in the derivatives market;
1.4.3. independence of trade organizers and the market participants;
1.4.4. methodology and procedures of trading and valuation of products.
1.5. In addition, the session’s participants-members of the Working Group discussed the issues related to the further work of the Working Group, namely:
1.5.1. preparation of a report on the results of the Working Group’s activities for the Competition Committee’s meeting at the Organization for Economic Cooperation and Development (OECD), which is expected in February 2013;
1.5.2. topics, as well as the place and the time of the fifth session of the Working Group.
2.1. To assign to the Working Group members to share their assessments of the situation of price formation on the world markets and their impact on national markets in order to prepare proposals for improvement to further discussions at the fifth meeting of the Working Group;
2.2. To instruct the representatives of the Federal Antimonopoly Service (the FAS Russia) and the Austrian Federal Competition Authority to prepare a report on the results of the Working Group and to present it at the OECD Competition Committee’s meeting, which is expected in February 2013;
2.3. To consider the next (fifth) session to be the final one, at which the following questions will be discussed:
2.3.1. exchange of experiences and approaches in relation to competition law enforcement in the market of oil and oil products;
2.3.2. the procedure for the exchange of non-confidential information among the members of the Working Group;
2.3.3. results of the Working Group;
2.3.4. preparation by the competition authorities of proposals for national governments to promote competition in the markets for oil and petroleum products.
2.4. To instruct the Working Group’s members to send their suggestions on the place and time of the fifth meeting of the Working Group to the Working Group’s coordinators (Ms. Elizaveta Musinova, a Consultant of the International Projects Division of the Department of International Economic Cooperation, the FAS Russia, tel: +7 (499) 795-76-86, e-mail: email@example.com; Mr. Rainer Kaltenbrunner, a Chief Economist, the Austrian Federal Competition Authority, tel: +43-1-24508-318, e-mail: firstname.lastname@example.org).
Supplement: presentations by “Argus Media”, “Platts, The McGraw-Hill Companies Inc.”, and “Intercontinental Exchange” (ICE).
Minutes 4 - Oil Working Group
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Platts Oil Benchmarks & Price Assessment Methodology (Platts)
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Price relationships between domestic and international markets (M. Perfilov)
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The interconnection between physical, OTC (P. Caddy)
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