Session 4 Experience in forming price indices for crude oil and petroleum products F EDERAL C OMPETITION A UTHORITY A USTRIA Rainer Kaltenbrunner

The Austrian experience Ex-refinery and wholesale product markets Term-contracts dominating Price formula: Platts product prices + + (negotiated individual) mark-up B UNDES W ETTBEWERBS B EHÖRDE

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 B UNDES W ETTBEWERBS B EHÖRDE

FCA´s Report on Platts Price Assessment Summary (July 2010): (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) B UNDES W ETTBEWERBS B EHÖRDE

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 B UNDES W ETTBEWERBS B EHÖRDE

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 B UNDES W ETTBEWERBS B EHÖRDE

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 …) B UNDES W ETTBEWERBS B EHÖRDE

Thank you very much for your attention! Tel.: B UNDES W ETTBEWERBS B EHÖRDE