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Session 4Experience in forming price indices for
crude oil and petroleum products
FEDERALCOMPETITIONAUTHORITYAUSTRIA
Rainer Kaltenbrunner
The Austrian experience
• Ex-refinery and wholesale product markets
Term-contracts dominating
Price formula:
Platts product prices +
+ (negotiated individual) mark-up
BUNDESWETTBEWERBSBEHÖRDE
The Austrian experience
• Retail markets
Have been aligned to Platts prices
• Rocks and feathers issue raised:– 2003 – 2007 asymmetric price response
– Investigation of FCA– From 2008 onwards asymmetric pattern no
more observable
BUNDESWETTBEWERBSBEHÖRDE
FCA´s Report on Platts Price Assessment
Summary (July 2010): http://www.bwb.gv.at
(Report covers only NEW Diesel and premium gasoline)
• Transparent to market participants
• Price assessment does not follow a fixed algorithm/model; Platts reaches a qualitative judgement on an day-to-day basis
Platts preserves some editorial latitude
(Problem of days with few or no contracts)
BUNDESWETTBEWERBSBEHÖRDE
FCA´s Report on Platts Price Assessment
• Structure of traders:– 40% - 60% majors– Considerable role of independent traders– Marginal (but growing) role of financials
• Market coverage:– 5% to 9% of total consumption– Gasoline cargo only 2,6% Coverage with respect to spot trades
substantially greater
BUNDESWETTBEWERBSBEHÖRDE
Issues for competition authorities
• Undisputable benefits:– Price indices reduce search cost– Risk allocation
• Transparency of assessment mechanism
• Robustness– Challengeable by market participants– Sort of network effects
• Sort of network effects
BUNDESWETTBEWERBSBEHÖRDE
Issues for competition authorities
• Provisions against manipulation
• Representative for market outcome
• Preventing conflicts of interest• Specific problems of “financialised” markets
(Futures …)
– Standardisation– Centralised clearing of contracts– ( EC communication 2009 …)
BUNDESWETTBEWERBSBEHÖRDE
Thank you very much for your attention!
Tel.: +43 1 24508 318
BUNDESWETTBEWERBSBEHÖRDE