Another week, another crisis for big oil. You might all have noticed that BP, Shell and other supermajors are in the news for “fixing the price of petrol”.
As someone that has spent a lot of my life advising natural resources firms I find this fascinating. i found the initial media coverage particularly strange as it appears to betray pretty much total lack of sophistication shown by a number of commenting parties. Which is strange as I deal with these people all the time, and I wouldn’t have expected them to drop the ball like this.
This first thing I’d like to suggest is that is very much not about fixing petrol prices. Whilst there clearly is a correlation between the price of Brent crude and the unleaded that we put in our cars, the price differentials under investigation are of such small value, and of a frequency that should not be influential on the “petrol” price we pay which is based on long term predicted averages.
This is about oil traders making a few more million in profit at the institutional level across capital and energy markets. They are trading a product that has to go through a transformational process, both industrial and monetary before it turns into petrol.
So why all the noise and why, if I’ve read all this right, have the media taken this line and why have the oil companies let them?
Well what’s actually happened is that the European Commission has indeed raided a number of big oil firms and a price reporting agency due to “concerns that the companies may have colluded in reporting distorted prices to a Price Reporting Agency to manipulate the published prices for a number of oil and biofuel products”. This is the official line from the Competition Commission website and its the specific institution that will have scared the bejesus out of various comms people.
The competition commission is the organisation that successfully went after Boeing and Microsoft and is also hunting for a Russian bear. They don’t go public till they think they have a very good case.
This means that the best communications practice is to keep your head down, make a generic “helping with enquiries” statements and say “no comment” an awful lot.
It was pretty much the same on the EC side. They did distribute a generic press release about the raids, and Brussels can be a bit leaky, but what normally happens in these situations went on as usual. All sides make official factual statements and then get in their bunkers, for risk of prejudicing either the investigation on the EC side, or any legal process on the other side.
This leaves an awful lot of space for conjecture and opinion to develop, and this is where the misconceptions have developed. Nature abhors a vacuum.
Normally, if there’s an issue or crisis (say an industrial accident) or a secret corporate action (acquisition or find raising) people like me are used by our clients to have “off the record” conversations at arms length with the media, investors, and wider stakeholders such as political figures. The whole thing is deniable and done at arms length, but generally these lines are intellectually acceptable and help the target come to a balanced conclusion on the situation.
This perception management approach is of course very much down to institutional and personal style. One of these firms is very well known to be deeply conservative in its comms and legal approach and has been out communicated on a number of confrontational situations in the past, but another is as aggressive as it gets when it comes to multi billion international corporations.
It would however appear that any briefing has been pretty ineffectual, as the worst thing that can happen for an oil firm is for a corporate issue to become consumer. As ever, it’s the connection to the “man in the street” that can really kick off the pressure on a corporation and its comms team. The media cares more, as do the politicians and regulators that you don’t want to annoy.
As I say, I think the commentariat has got this entirely wrong. It has taken what could be a very significant issue for the European and global crude oil markets and its major participants, with potential billion dollar repercussions for some of Europe’s largest firms, which is in of itself a very important business story and it has tried to make it a consumer story. This is because in some cases, it provides “relevance” to readers / watchers / listeners that aren’t interested in trading regulation. In part however, its because general commentators don’t know any better and are following the pack. If BBC Today says its about petrol prices, who are we to argue?
So what’s the solution?
Well as an ex very junior forex trader, I’d say “don’t get caught”. All markets are manipulated in criminal ways. This is wrong, buts its the way of cap markets life. It’s the regulators’ jobs to catch and stop criminal activity and if criminals get caught, they deserve to have to book thrown at them.
As a fairly experienced comms advisor however, I’d get someone deniable to have a quiet word with the external contacts that matter. They should do their level best to make sure that when the EC comes back to this issue, all the vital external contacts see this as a matter of “regulatory governance of a small number of commodity traders.”
Communications should work hard to make the issue dull, take it away from the consumers and demonstrate a long term commitment to corporate governance.
There you go, you’ve already forgotten then is potentially a multi billion dollar fraud hadn’t you?