BP accused of price manipulation

Regulators allege its BP Products North America subsidy artificially forced up prices by buying up huge propane stocks only to withhold them from the market.

BP has denied the civil charges and said it intended to defend itself, and added that staff had been dismissed.

On Wednesday, a former BP trader, Dennis Abbott, pleaded guilty to manipulating the propane market.

Market practices

The charges against BP come as US consumers face increased petrol and heating oil costs caused by a surge in global commodity prices.

The Commodity Futures Trading Commission (CFTC), which regulates the market, said the propane had been needed to fuel homes in rural areas.

Particularly in the north-eastern and mid-western regions of the US, propane is by far the main source of domestic heating - and constitutes a growing slice of household budgets.

"Market manipulation did not occur. We are prepared to make and to prove that case in the courts"
BP

Investigators allege that during February 2004 propane prices jumped more than 40% to about 90 cents a gallon, a price that "would not otherwise have been reached under normal pressures of supply and demand".

They claim that BP managed to ramp up the price by buying stocks of propane until it controlled almost 90% of the domestic market.

"Cornering a commodity market is more than a threat to market integrity," said Gregory Mocek, the CFTC's enforcement director.

"It is an illegal activity that could have repercussions for commercial market participants as well as retail consumers around this country," he added.

The CFTC estimated that about seven million people were using propane for heating and cooking in 2003.

BP denial

Ronnie Chappell, a BP spokesman, said "market manipulation did not occur".

But he added that following an internal investigation, the firm found that several employees failed "to adhere to BP policies governing trading activities" and had been dismissed.

"We have also taken steps to strengthen the supervision of our trading activities," he added.

The CFTC alleges that the market manipulation was carried out "with the knowledge, advice and consent of senior management" at BP Products North America.

Mr Abbott pleaded guilty to charges that he tried to "manipulate and corner the propane market".

The 34-year-old from Houston has agreed to cooperate with authorities in their investigation and faces up to five years in jail and a fine of up to $250,000.

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