Australian Trader Faces Charges for Global Crude Oil Price Manipulation

A commodity trader in Australia charged with organizing a grave crude oil price manipulation allegedly obtained over $50 million USD in illegal revenue. The trader is now scheduled for trial in New York. In one of the biggest cases of the CFTC or Commodity Futures Trading Commission of the United States, the regulator claims that 44-year old James Dyer established a network of shell businesses to pile up millions of oil barrels that they do not have actual use of.

The move purportedly distorted markets with the appearance of a worldwide shortage of oil in January of 2008 and allowed the associates of Dyer to profit from rising oil prices in the market.

Dyer, together with Nick Wildgoose, his colleague in the United States, then purchased derivatives, gambling on a high oil surplus before supposedly releasing their oil stockpiles back to the marketplace, leading oil prices to fall sharply.

According to the CFTC, the traders repeated this illegal market move two times to turn over unwanted crude amounting to at least 26.6 million barrels from January to March 2008. Treble damages totaling up to $200 million USD is the intended collection target of the regulators pursuing this case.

In September of 2011, Dyer, Wildgoose together with three Arcadia Petroleum companies, filed long submissions forcing the District Court of the United States for summary dismissal. Their contention is simply that they are too small to manipulate the global crude oil price, regardless of whether they ever planned to do so.

The CFTC says that the impact of the traders was real because their efforts were aimed at an important oil hub at Cushing, Oklahoma, one of the primary drivers for global crude prices.

The regulator claimed that investigators of the CFTC obtained emails showing how Dyer told his colleagues about the September 2007 scheme and said that plenty of money can be made in case the market believes that an oil shortage exists at Cushing.

The CFTC maintains that the traders were getting ready to do a market fix for the third time in April of 2008, but decided to stop when they knew that they were being investigated.

Dyer was born in California and became famous in the 1990s as BP’s crude oil department head in Chicago. He retired in the early parts of 2000s at Brisbane and started to invest in properties at Queensland. In 2006, he joined Arcadia but still held his residency in Brisbane.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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