The Asylum, Renegades Who Hijacked the World’s Oil Market
Leah McGrath Goodman, Harper Collins, $27.99
From its home in lower Manhattan, the New York Mercantile Exchange (NYMEX) –the world’s largest physical commodity futures exchange– trades billions of dollars worth of energy products on a daily basis. Yet, despite heavily influencing soaring oil spot prices through a virtual monopoly on open market futures that lasted until the advent of screen trading in 2006, this club of ‘thugs’ and ‘dropouts’ emerged from humble beginnings. As financial journalist Leah Mcgrath Goodman recounts in her new oral history, the asylum, NYMEX’s evolution from a ragtag bunch of potato traders to oil market king-makers was driven in part by astute leadership, greed and sheer blind luck. Goodman’s story begins in the 1970s, when NYMEX trading activity revolved around the perennial efforts of Maine potato farmers to hedge on future price movements, and the corresponding attempt by speculators to game the system through last-minute manipulation. When the market was shut down by regulators in 1976, however, after defaults on deliveries of more than 50 million pounds of potatoes, this dwindling ‘band of outsiders’ despised by the Wall street elite were left rudderless. Taking a punt on a dormant contract for heating oil futures, then-chairman Michel Marks unwittingly set NYMEX members on a path to untold riches, in the process creating the world’s first free oil market and a natural gas futures market –the ‘$1000 table at the energy casino’.
With a gossipy fixation on the individuals –and their myriad vices– that propelled the rise of NYMEX, Goodman clearly writes with the lay reader in mind. At the same time, the breathless descriptions of vicious boardroom politics and a pit-culture ruled by drugs, sex and violence serves to distract from the real story. Which is one of lax regulatory oversight and a physical ‘market’ increasingly hostage to the price volatility prized by non-industry speculators.
By A. K.