Striking it rich

TWO lines of business have stood out of late for their inability to make money: journalism and oil. So when it emerged on May 23rd that Argus Media, a British firm that reports global commodities prices, is to be sold to an American investment firm for $1.4 billion, it aroused a variety of emotions. One was surprise. “Data about oil markets now seem to be worth more than oil itself,” exclaimed one executive of a commodities exchange. Another, in the words of an employee at S&P Global Platts, Argus’s main rival, was “jealousy”. The sale has turned some of Argus’s 750 scribblers, a quarter of whom are said to own shares or options, into millionaires.

Argus began in 1970 as a newsletter reporting on petroleum-product prices in the Netherlands. General Atlantic, which is buying out the family of Jan Nasmyth, its late founder, has made the most aggressive move so far in an industry that is fast consolidating. Its leaders, Platts and Argus, are battling for dominance over reporting prices of the most widely used oil benchmarks, such as Dated Brent and West Texas Intermediate (WTI), against which billions of dollars-worth of oil are priced each day.

The benchmarks are used by oil companies, oil-producing countries, derivatives traders and others to decide at what level they should price hundreds of different grades of oil. Their providers make money by selling subscriptions to their information; the more prominent the benchmark, the more subscribers it generates.

In recent years, Platts has made the running in the oil markets with its Brent assessment, based on four grades of North Sea crude, which is used as a reference for petrol prices stretching from Europe to Asia. WTI, which sets the price of different grades of oil traded in the Americas, is assessed at a landlocked hub in Oklahoma and has not got the same global reach.

General Atlantic says its interest in Argus grew after 2009, when big producers like Saudi Arabia began using its sour-crude index rather than a rival from Platts to price imports into the United States—an indication that Platts’s leadership of the market was not impregnable. In December America lifted a ban on crude exports, giving WTI a new lease of life. General Atlantic hopes Argus’s WTI physical assessment will become an international rival to Brent. “The battleground is global,” says Adrian Binks, who will remain Argus’s boss after over 30 years leading the company.

Asia is a further bone of contention as trade flows have shifted east. Platts’s long-established Dubai benchmark, used to price Middle Eastern crude bound for Asia, has been whipped around in the past year by aggressive trading from two big Chinese oil firms, Unipec and China Oil. India’s Reliance is also muscling in, and there is a vigorous new source of demand from China’s so-called “teapot” refiners, recently permitted to import oil. Big oil traders like Royal Dutch Shell, long used to calling the shots on Brent crude, have complained about undue Chinese influence on prices in Asia. Platts says it has addressed the problem by adding crudes to make the benchmark more liquid this year.

There are also calls for stronger regulation as the industry consolidates. “There’s a huge tension between the economic value of these businesses—both to their shareholders and the broader economy—and the lack of oversight provided by host governments,” says Owain Johnson, managing director of the Dubai Mercantile Exchange (DME).

The companies argue that they are media outlets covering physical commodities, and should not be regulated like futures markets such as the Chicago Mercantile Exchange, where WTI futures are traded, or the DME. Though their benchmarks carry enormous weight, they are gathered by journalists who sit in newsrooms, watching screens and contacting traders by phone and instant messenger. They say they police themselves based on principles set by the International Organisation of Securities Commissions in 2012.

They may be partially reassured that General Atlantic, an investor in Airbnb and Uber, disrupters of hotel and taxi services respectively, understands the importance of trying to keep regulators at bay. In the meantime, it has created a rare species at Argus: the rich and happy journalist.