Manipulation and Gaming of Energy Markets
Energy Markets: Introduction
Energy Trading and Marketing: The Macro View
Energy Trading: The Organisation
Weather Information in Energy Trading
Energy Markets: The Instruments
Energy Markets: Structured Transactions
Energy Markets: Exchanges
Energy Markets: Market Participants and Regulatory Developments
Natural Gas: Upstream
Non-conventional Natural Gas
Natural Gas Transportation and Storage
US Natural Gas Markets
International Natural Gas Markets
Oil Markets: Properties, Production and Reserves
Non-Conventional Oil
Oil Processing
Oil Transportation and Storage
Oil Pricing
Transactions in the Oil Markets
Electricity: The Basics
Power Generation
Transmission, Loads and Power Pools
Analytical Tools
Electricity Markets Transactions
Manipulation and Gaming of Energy Markets
Emission Markets
Coal Markets
Conclusions
Price discovery – the process through which prices are determined and communicated to market participants – may be affected by occasional manipulation. Given the very vigorous measures taken by regulators in the US and the EU in the last few years, in our view the occurrences of manipulation have been infrequent (or the manipulators have learned new tricks). Still, the potential for manipulation exists, and traders and risk managers should be aware of this issue. A trader who engages in manipulation puts themselves and their firm in serious danger. A trader who is a victim of manipulation can incur significant losses, which are even more painful if their trade was based on solid market fundamentals and good research.
In this chapter, we will discuss some historical instances of market manipulation in the gas and electricity markets. What is interesting is that, in many cases, the manipulation in the gas markets was driven by a desire to influence electricity prices. For these, we have the benefit of ample documentation due to actions taken by the regulators. We shall also cover what seems to be an emerging pattern of manipulation in the energy markets: active trading in the
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