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

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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

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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)

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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

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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

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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 …)

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Thank you very much for your attention!

rainer.kaltenbrunner@bwb.gv.at

Tel.: +43 1 24508 318

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