The Federal Energy Regulatory Commission (FERC) recently nabbed BP in an alleged gas market manipulation scheme. After Hurricane Ike struck Galveston, TX, in 2008, the Houston Ship Canal (HSC) gas prices dropped, and when they did, BP saw a chance to profit.
FERC accused BP of manipulating the HSC gas prices, by buying and selling physical gas, in order to increase profits. FERC first made the allegations in 2011 after a recorded phone call, that took place in November 2008, between a BP trading trainee and a senior trader at the company’s Southeast Gas Trading desk surfaced.
The traders involved in the phone call are the trainee, Clayton Luskie, and senior trader Gradyn Comfort. Luskie, who had only been with the firm for three months at the time, called Comfort to talk about the trading scheme. FERC order points out that during the call, Luskie asked Comfort, “So how would you explain our, um, our dealings on (Houston Pipeline) and with our paper position that don’t make it sound like we’re manipulating the index?” Throughout the call, Comfort continually paused, spoke briefly, and eventually interrupted Luskie, instructing him to call on an unrecorded line.
Comfort’s shuffling and diversion of the conversation to an unrecorded line are highly suspect and rightfully caused the FERC to raise eyebrows.
FERC provided that “Luskie’s statements on the recorded call were sufficient to provide staff an outline of the traders’ scheme, which the underlying trade data confirmed.” FERC has now ordered BP to pay a $29 million fine and return $800,000 of profits unjustly made from the alleged scheme.
BP denies that the traders did anything wrong and when the company conducted an internal investigation, it found no wrongdoing. But, of course, it wouldn’t. This instance isn’t the first time that BP paid to settle allegations of market manipulation. In 2007, BP had to pay $303 million to the U.S. Commodity Futures Trading Commission because of an alleged propane gas market scheme in 2003 and 2004. Sometimes, old dogs only know old tricks.
“If the Federal Energy Regulatory Commission’s allegations of price manipulation bear out, we will have yet another crime to add to BP’s rap sheet,” said Rick Outzen, the investigative reporter who covered the 2010 BP oil disaster for The Daily Beast. “Because of its reckless disregard for our laws and regulations, the question that we should be asking is whether the British oil giant should be allowed to continue doing business in this country.”
FERC has given BP 30 days to either pay up or defend against the allegations. BP spokesman Geoff Morrell said BP will “vigorously defend against these allegations.”
Whether there was ill intent or not is unimportant. The fact remains that some newjack trader wanted to “impress a senior trader,” and in the process, his chase after profits and notoriety within his firm overrode integrity and business ethics.
Joshua de Leon is a writer and researcher with Ring of Fire.