BP Accused of Cornering Propane Market in 2004
STEVE INSKEEP, host:
Federal regulators have charged an arm of the giant energy company BP with briefly cornering the U.S. market for propane. The alleged market manipulation drove up prices for millions of families that heat with propane, not to mention backyard barbecuers. Regulators say this scheme was approved by higher-ups within the company, as NPR's Scott Horsley reports.
SCOTT HORSLEY reporting:
The regulator's complaint, filed in Chicago federal court, accuses BP North America of illegally cornering the market for propane in February of 2004. A trading manager named Mark Radley allegedly sketched out the plan in a conversation with another BP trader. Under standard industry practice, Radley's phone calls were recorded.
(Soundbite of recorded BP telephone call)
Mr. MARK RADLEY (Trading Manager, British Petroleum): What we stand to gain is not just we would make money out of it, but we would know from thereafter that we could control the market at will.
HORSLEY: BP started buying propane, quietly at first, a little at a time, until by month's end the company had locked up nearly 90 percent of the propane along a critical pipeline. Enforcement Director Gregory Mocek, of the Commodities Futures Trading Commission, says at that point BP was able to dictate artificially high prices; almost 50 percent higher than at the beginning of the month.
Mr. GREGORY MOCEK (Director of Enforcement, Commodities Futures Trading Commission): Through their exploitation of the market, they forced prices higher. As a result, a number of American consumers were affected by paying higher heating prices.
HORSLEY: Authorities say this wasn't the first time BP had tried such a scheme. The company allegedly held a dry run in April of 2003, also captured in traders' telephone calls.
Mr. DENNIS ABBOTT (Propane Trader, British Petroleum): Hey, Joey(ph). It's Dennis.
JOEY: Hey, man.
Mr. ABBOTT: How does it feel taking on the whole market, man?
(Soundbite of laughter)
JOEY: It's big, big, man.
Mr. DENNIS ABBOTT: Dude, you're the entire (censored) propane market.
HORSLEY: The propane trader you hear laughing there, Dennis Abbott, pleaded guilty yesterday to criminal conspiracy charges. Abbott, who was recently fired by BP, has agreed to cooperate in the ongoing investigation. BP says in a statement it's also cooperating, but the company denies any market manipulation occurred, and says it's prepared to make that case in the courts.
Scott Horsley, NPR News.