The Prize: The Epic Quest for Oil, Money, and Power

by Daniel Yergin

Floor traders took enthusiastically to crude futures in New York. Pushing and elbowing themselves into the seething crowd on the floor of the Nymex, they shouted and furiously waved their arms to register their orders for contracts. The traders were also pushing and elbowing their way into the oil industry, which hardly took kindly to them. The initial reaction to the futures market on the part of the established oil companies was one of skepticism and outright hostility. What did these shouting, wildly gesticulating young people, for whom the long term was perhaps two hours, have to do with an industry in which the engineering and logistics were enormously complex, in which carefully cultivated relationships were supposed to be the basis of everything, and in which investment decisions were made today that would not begin to pay off until a decade hence? A senior executive of one of the majors dismissed oil futures “as a way for dentists to lose money.” But the practice—of futures, not dentistry—moved quickly in terms of acceptability and respectability. Within a few years, most of the major oil companies and some of the exporting countries, as well as many other players, including large financial houses, were participating in crude futures on the Nymex. Price risk being what it was, none of them could afford to stay out. As the volume of transactions built up astronomically, Maine potatoes became a distant, quaint, and embarrassing memory on the fourth floor of the World...