If the EU’s investigation into Platts, which determines the internationally used BRENT benchmark for crude oil pricing, for alleged price manipulation is confirmed, it will be yet another indictment of the credibility of leading western firms in setting global financial standards. Barclays was found guilty of fixing Libor (interest rates) in June 2012 and fined $450 million and CEO Bob Diamond was made to resign; similarly RBS and UBS were also made to pay multi-million dollar fines. More recently, ICAP was put under investigation for manipulating ISDAFix (interest rate swaps).
India also uses BRENT, the predominant benchmark along with some others, to determine crude oil prices. In 2011-12, we paid $111.89 per barrel of oil, part of a total import bill of Rs. 6,72,000 crores (roughly $122 billion). Even a slight change in price impacts our import bill – and our related Rs. 43,580 crores in domestic subsidies.
All the importing countries of the world face a similar impact as India. The price-fixing expose only reaffirms our argument that BRICS and other emerging nations must develop alternate financial institutions and architecture that can bring credibility and fairness to everyone in the developing and developed world.
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