The government announced yesterday that it will investigate whether traders and city speculators are rigging markets to force up petrol prices.
In July, a report commissioned by the G20 concluded that the oil market was “wide open to manipulation.”
The International Organization of Securities Commissions (IOSCO), who compiled the report found that traders, oil companies and hedge funds have an “incentive” to distort the market with phoney prices to boost their trade.
And yesterday, Energy Minister John Hayes said that he will ask regulators to look into the market after more than 80 MPs, led by Conservative MP Robert Halfon, asked for the government to look into the cost of petrol and diesel.
Mr Hayes said he would include an investigation into fuel prices alongside the planned investigation into the Libor scandal.
He will also ask the Financial Services Authority (FSA) to investigate.
Mr Hayes said: “As a result of the arguments that Robert Halfon has put today, I will instruct my officials to do a detailed study, with analysis of how far people have to travel to reach their nearest petrol station and how this can change over time. He can count that as a significant victory.”
Mr Hayes said that data collected by his department shows that falls in wholesale prices are being passed on to motorists at the forecourt, but: “Nevertheless I am going to ask my officials to look at this matter again, to revisit their analysis, as a direct result of this debate. The Government would be happy to take action again if the evidence legitimises it.”
Mr Halfon told MPs that there was “evidence of dodgy speculators rigging the market and pushing up the price of oil’ and that as a result ‘petrol and diesel have never been more expensive in real terms.”
He is calling for any traders who are found guilty of rigging the market to be sent to prison as they were in the United States.
Mr Halfon cited the evidence of “whistle-blower” who has shown exactly how prices are rigged and is a full-time oil trader who works in the UK oil futures commodity markets.
According to Mr Halfon's researcher, the whistle-blower said: "I trade the oil market on a daily basis, and every day the price is manipulated.
"All through July, for example, there has been a massive buying-pressure on oil futures for August and September 2012. Both were trading at around a $0.5c to $1 dollar premium.
"This gives a false impression of the market and inflates the price of the nearby oil price, making prices higher on retail markets so pushing up the price of petrol at the pumps. Profiteering seems to be the only objective."
The Office of Fair Trading (OFT) has already announced that it is to investigate the issue.
AA President Edmund King said an inquiry was due and that high oil prices are hindering the economic recovery.
He said: “Stock market speculators have regularly seized on every whiff of mildly supportive news to pump up the value of crude, exaggerate its value and maximise the return on their gambling.”