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Petromania: Black gold, paper barrels and oil price bubbles

Book Description

The spike in the oil price to almost $150 per barrel in summer 2008 was the last great excess of the crazed noughties bull markets, staged even as stock markets crumbled worldwide. Contrary to entrenched establishment opinion still embraced by many, 'Petromania' proves this oil price blowout was a classic speculative bubble, but driven primarily by new modes of financial speculation. Demolishing widespread, oft-repeated but incorrect arguments that such trade in paper barrels cannot move oil prices, 'Petromania' details how this financialisation of the oil markets meshed with other trends to create a moment that saw investment banks and hedge funds collectively wield more power over the price of black gold than OPEC or any multinational oil company. It also shows how regulatory blindness to the 'dark matter' of modern finance caused so many to confuse fantasy with reality for so long. 'Petromania' matters not just because fortunes were won and lost in oil's dizzying ascent and crash, but because this bubble spelled misery for ordinary people worldwide, destabilised developing world governments, and delayed interest rate cuts desperately needed to address the ongoing global recession. 'Petromania' matters because while all eyes are on the crippled banking system, we risk ignoring valuable lessons about twenty-first century markets from this other great boom-and-bust - even as the forces that blew the bubble are once again at work. And 'Petromania', this tale of black gold, dark matter and paper barrels, is written by one of the few commentators who correctly called the bubble before it burst.

Table of Contents

  1. Cover
  2. Publishing details
  3. Acknowledgements
  4. Preface
  5. Introduction
    1. A Shadowy History
    2. Black Gold, Devil’s Excrement
    3. Follow the Money
  6. 1: The Ascent
    1. 1.1 The Triple-Digit Threshold
    2. 1.2 Black Gold, Diabolical Prices
    3. 1.3 Grand Narratives
    4. 1.4 Oil’s Unstoppable Explosion
    5. 1.5 The Dissidents
  7. 2: Paper Barrels
    1. 2.1 Whose Oil Price?
    2. 2.2 Future Perfect
    3. 2.3 Future Imperfect
    4. 2.4 Enter the Speculators
    5. 2.5 Growth in Paper Barrels
    6. 2.6 The Phantom Menace
    7. 2.7 Dogs That Did Not Bark
  8. 3: The Financialisation of Oil
    1. 3.1 The Hearings
    2. 3.2 The Meaning of “Financialisation”
    3. 3.3 The Growth in Speculative Interest
    4. 3.4 Enter the Swap Dealers
    5. 3.5 Commodities as an Asset Class
    6. 3.6 Constructing a Commodity Return
    7. 3.7 The Rise of the Index
    8. 3.8 Black Gold’s “Dark Matter”
    9. 3.9 Through a Glass, Darkly
    10. 3.10 A Special Call
  9. 4: The Peak Weeks
    1. 4.1 Entrenched Ideas
    2. 4.2 The Serious Competition
    3. 4.3 The Reality and Implications of Curve Integration
    4. 4.4 Mad May
    5. 4.5 “Oil dotcom”
    6. 4.6 The Dragon’s Hoard
  10. 5: A Bubble by Any Other Name
    1. 5.1 The Bust
    2. 5.2 Forever Blowing Bubbles
    3. 5.3 Minsky’s Moment
    4. 5.4 The Pathology of Bubbles
    5. 5.5 Inside the Bubble
    6. 5.6 What the Studies Do and Do Not Say
    7. 5.7 The Dissenting Commissioner
    8. 5.8 Darker Portents
    9. 5.9 Diagnosis: petromania
  11. 6: Petromania Redux
    1. 6.1 Three Wise Men
    2. 6.2 The Aftermath
    3. 6.3 Goldman Sachs: Panto Villain?
    4. 6.4 The CFTC Finally Sees the Light
    5. 6.5 The Bubble is Burst, Long Live the Bubble
    6. 6.6 Oil Futures – a Fair Price for Oil?
  12. Sources & Bibliography
    1. Core Sources, With Explanatory Notes
    2. CFTC-Originated Studies, Reports & Miscellanea
    3. Other US Government Agency Reports
    4. Submissions to US Legislative Hearings and Associated Documentation
    5. Selected Relevant Investment Bank Analyst Reports
    6. Statistical Information on Energy Markets
  13. Bibliography
    1. Oil, History and Geopolitics
    2. Peak Oil Theorists
    3. The Financialisation of Oil and Commodity Markets
    4. Speculative Bubbles and Market Irrationality