The process for setting benchmark oil prices has never been particularly transparent, depending as it does on self-reporting by traders of offer and sale prices to energy pricing agencies like Platts, a division of McGraw Hill Financial Inc. (NYSE: MHFI). Platts, which depends on the truthfulness of traders, then massages the data it receives and produces a benchmark price.

A report in today’s Wall Street Journal indicates that it ought to be fairly easy for the European Commission (EC) to substantiate charges of price fixing in the world’s oil markets. Last month the EC raided the offices of Royal Dutch Shell PLC (NYSE: RDS-A), BP PLC (NYSE: BP), Statoil ASA (NYSE: STO) and Platts to collect information on the charges. Italian oil major Eni SpA (NYSE: E) was also asked to provide information, but was not included in the raids.

One trader told the WSJ how the fiddling works. He offers to sell a small quantity of oil at a loss, driving down the price that he reports to the pricing agency. Once the lower benchmark price is published, he then buys larger quantities at the lower price.

Traders do not believe the practice is illegal, the Journal reports, because “it doesn’t involve colluding with competitors, reporting fake prices or other obviously forbidden behavior.” They also admit that the practice is intended to “skew oil benchmarks.”

Platts denies that such fiddling occurs, telling the WSJ, “We are not aware of any evidence that our price assessments are not reflective of market value.”

The global oil markets trade about $3.4 trillion worth of crude in a year. A few dollars a barrel can make a big difference in a market of that size.

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