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Center on Global Energy Policy Series
Crude Volatility: The History and the Future of Boom-Bust Oil Prices
As OPEC has loosened its grip over the past ten years, the oil market has been rocked by wild price swings, the likes of which haven't been seen for eight decades. Crafting an engrossing journey from the gushing Pennsylvania oil fields of the 1860s to today's fraught and fractious Middle East, Crude Volatility explains how past periods of stability and volatility in oil prices help us understand the new boom-bust era. Oil's notorious volatility has always been considered a scourge afflicting not only the oil industry but also the broader economy and geopolitical landscape; Robert McNally makes sense of how oil became so central to our world and why it is subject to such extreme price fluctuations.
Tracing a history marked by conflict, intrigue, and extreme uncertainty, McNally shows how―even from the oil industry's first years―wild and harmful price volatility prompted industry leaders and officials to undertake extraordinary efforts to stabilize oil prices by controlling production. Herculean market interventions―first, by Rockefeller's Standard Oil, then, by U.S. state regulators in partnership with major international oil companies, and, finally, by OPEC―succeeded to varying degrees in taming the beast. McNally, a veteran oil market and policy expert, explains the consequences of the ebbing of OPEC's power, debunking myths and offering recommendations―including mistakes to avoid―as we confront the unwelcome return of boom and bust oil prices.
Tracing a history marked by conflict, intrigue, and extreme uncertainty, McNally shows how―even from the oil industry's first years―wild and harmful price volatility prompted industry leaders and officials to undertake extraordinary efforts to stabilize oil prices by controlling production. Herculean market interventions―first, by Rockefeller's Standard Oil, then, by U.S. state regulators in partnership with major international oil companies, and, finally, by OPEC―succeeded to varying degrees in taming the beast. McNally, a veteran oil market and policy expert, explains the consequences of the ebbing of OPEC's power, debunking myths and offering recommendations―including mistakes to avoid―as we confront the unwelcome return of boom and bust oil prices.
336 pages, Hardcover
Published January 17, 2017
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643 people want to read
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Displaying 1 - 15 of 15 reviews
September 18, 2017
Outstanding, well-written and thoroughly researched, this is unequivocally the best history of the oil business I have encountered during my 40 year career as an oil trader. Disclosure: I spoke at a bank conference in 2012 with Bob McNally and he literally blasted me off the stage. He is a fast-talking, spellbinding orator who is not afraid to voice a bold opinion or take a contrarian tack. And he has been right quite a few times. He writes as well as he lectures. This book does an incredible job tracking the ongoing challenge to control supply/demand fluctuations and violent price swings.
Before there was OPEC there were the Seven Sisters and the Texas Railroad Commission and before that Rockefeller owned everything until the Supreme Court dismantled his empire in 1911.
Recalling Bob's lecture a few years back the adjective that came to mind was "Rapid Fire". Then I noticed the name of his consultancy - Rapidan.
Any aspiring oil trader should be required to read this book at least twice and take a test before they are granted permission to enter the trading floor.
Before there was OPEC there were the Seven Sisters and the Texas Railroad Commission and before that Rockefeller owned everything until the Supreme Court dismantled his empire in 1911.
Recalling Bob's lecture a few years back the adjective that came to mind was "Rapid Fire". Then I noticed the name of his consultancy - Rapidan.
Any aspiring oil trader should be required to read this book at least twice and take a test before they are granted permission to enter the trading floor.
January 8, 2019
This is one of the best books I have read on the history of the oil industry. It specifically focuses on why oil as a commodity experiences cycles of extreme boom and bust, and the reasons why there have been periods of relative stability. In researching the history of oil, I have found many excellent books and studies on specific eras and countries- these works tend to be about 800 pages long and filled with mind-numbing statistics and technical minutiae. This book essentially condenses many of these detailed texts into something much more accessible and relevant to the present day. (Data geeks, don't worry- there is no shortage of statistics here, only thoughtful presentation of the most important points.) You will need to look elsewhere if you want the nitty gritty of a specific topic- like the history of Standard Oil/Rockefeller, OPEC, or the relationship between colonialism and oil in the Middle East, etc. But this is the only book I have encountered that manages to pack so much global history into relatively few pages.
Despite the huge amount of content spanning from the 1800's until today, the book is remarkably light on theory, political opinions, and judgment calls. Because of this, I expect it will resonate well with people in business, finance, and the energy sector. With that being said, staying away from politics is sometimes negative. By focusing on oil as a standalone topic, McNally spends very little time on broader trends in political economy which are deeply related to our fossil fuel addiction- including climate change, imperialism, labor history, oligarchy, considerations of power, the global financial system, etc. Anyone who wants a deeper look into the political economy of oil should also read a very different, more radical perspective on this topic- "Carbon Democracy" by Timothy Mitchell- which offers a counter-narrative of the relationship between fossil fuels and modern society, and dives straight into the bigger picture beyond cycles of boom and bust. I wish I had read McNally's book before Mitchell's, though, as it is a more conventional account of the history of oil which gives you the background data to actually debate larger political and economic trends.
Despite the huge amount of content spanning from the 1800's until today, the book is remarkably light on theory, political opinions, and judgment calls. Because of this, I expect it will resonate well with people in business, finance, and the energy sector. With that being said, staying away from politics is sometimes negative. By focusing on oil as a standalone topic, McNally spends very little time on broader trends in political economy which are deeply related to our fossil fuel addiction- including climate change, imperialism, labor history, oligarchy, considerations of power, the global financial system, etc. Anyone who wants a deeper look into the political economy of oil should also read a very different, more radical perspective on this topic- "Carbon Democracy" by Timothy Mitchell- which offers a counter-narrative of the relationship between fossil fuels and modern society, and dives straight into the bigger picture beyond cycles of boom and bust. I wish I had read McNally's book before Mitchell's, though, as it is a more conventional account of the history of oil which gives you the background data to actually debate larger political and economic trends.
June 1, 2020
The problem of oil, it might be tersely said, is that there is always too much or too little.
–Myron Watkins, Oil: Stabilization or Conservation? 1937
There would hardly be any better way to rationalize the volatility in the crude prices than through this quote by Myron Watkins. In the beginning, this book seemed to me a lot like an abridged and simpler version of The Prize by Daniel Yergin. That was obviously a premature assessment. The book has done a good justice in trying to take the reader through the roller coaster ride of the crude prices over the course of history.
Why is the price of oil the way it is? Why the oil prices can never fully be left on market forces of demand and supply? Why the oil industry keeps falling in the lap of one or the other cartel or association? This book has done a commendable job in answering these and so many other questions with such ease and simplicity. The entire cycle of boom, bust and stability from early 1859 to 2015 has been broken into early volatility of mid-19th century, stability of the Rockefeller era, another boom-bust cycle following the dissolution of Standard Oil, TRC (Texas Railroad Commission) stability, OPEC era of turbulence, followed by now current gyrating oil prices.
The nature of oil industry and the consumers of oil is such that there is huge lag between the change in prices and resultant change in consumption pattern. There is a huge investment made in the industry and infrastructure that consumes oil, which cannot switch to an alternative energy source overnight. Not that there is any significant alternative source available. Vehicles and containers that ship potatoes can carry diamonds but the equipment in oil industry is only good for one thing – producing, transporting and refining oil. Accordingly, low is the enthusiasm of Governments to solve something which they see as a future problem. Maybe that is why the Paris agreement includes no enforcement mechanism.
The book has argued that the stability in oil price is derived more from integration and cooperation like Rockefeller, TRC, Seven Sisters rather than allowing the market forces to run amok. The book has interesting study of Saudi Arab playing the role swing producer in the 1980s, maintaining sufficient spare capacity to maintain prices. Thereafter Saudi Arab learnt its lessons from the treacherous OPEC members and deciding on never to play the same role again. Many expected the shoes to be filled by Shale Oil with additional capacity within a much stable territory of United States. However, the expensive and uncertain Shale wells along with the growing Environmental concerns about Fracking resulted in failure of Shale Oil to truly stand up to its promise.
An important development in the prices of crude oil was replacement of market pricing from the administered pricing by OPEC. The Peak Oil fears has also time and again contributed to the instability in oil prices. Although now we are sure that the oil reserves will last at least until the middle of the century.
The book ends with very good suggestions on how to decrease the volatility of oil prices with improved data availability, building up strategic reserves, coordinated efforts, hedging and also avoiding mistakes from past like import tariff, price control and rationing.
In the end, in the oil market it is not just challenging to predict what will happen but also to assess what did just happen.
–Myron Watkins, Oil: Stabilization or Conservation? 1937
There would hardly be any better way to rationalize the volatility in the crude prices than through this quote by Myron Watkins. In the beginning, this book seemed to me a lot like an abridged and simpler version of The Prize by Daniel Yergin. That was obviously a premature assessment. The book has done a good justice in trying to take the reader through the roller coaster ride of the crude prices over the course of history.
Why is the price of oil the way it is? Why the oil prices can never fully be left on market forces of demand and supply? Why the oil industry keeps falling in the lap of one or the other cartel or association? This book has done a commendable job in answering these and so many other questions with such ease and simplicity. The entire cycle of boom, bust and stability from early 1859 to 2015 has been broken into early volatility of mid-19th century, stability of the Rockefeller era, another boom-bust cycle following the dissolution of Standard Oil, TRC (Texas Railroad Commission) stability, OPEC era of turbulence, followed by now current gyrating oil prices.
The nature of oil industry and the consumers of oil is such that there is huge lag between the change in prices and resultant change in consumption pattern. There is a huge investment made in the industry and infrastructure that consumes oil, which cannot switch to an alternative energy source overnight. Not that there is any significant alternative source available. Vehicles and containers that ship potatoes can carry diamonds but the equipment in oil industry is only good for one thing – producing, transporting and refining oil. Accordingly, low is the enthusiasm of Governments to solve something which they see as a future problem. Maybe that is why the Paris agreement includes no enforcement mechanism.
The book has argued that the stability in oil price is derived more from integration and cooperation like Rockefeller, TRC, Seven Sisters rather than allowing the market forces to run amok. The book has interesting study of Saudi Arab playing the role swing producer in the 1980s, maintaining sufficient spare capacity to maintain prices. Thereafter Saudi Arab learnt its lessons from the treacherous OPEC members and deciding on never to play the same role again. Many expected the shoes to be filled by Shale Oil with additional capacity within a much stable territory of United States. However, the expensive and uncertain Shale wells along with the growing Environmental concerns about Fracking resulted in failure of Shale Oil to truly stand up to its promise.
An important development in the prices of crude oil was replacement of market pricing from the administered pricing by OPEC. The Peak Oil fears has also time and again contributed to the instability in oil prices. Although now we are sure that the oil reserves will last at least until the middle of the century.
The book ends with very good suggestions on how to decrease the volatility of oil prices with improved data availability, building up strategic reserves, coordinated efforts, hedging and also avoiding mistakes from past like import tariff, price control and rationing.
In the end, in the oil market it is not just challenging to predict what will happen but also to assess what did just happen.
October 9, 2021
“Crude volatility” is exceptionally well researched and well written from a historical perspective. The author analyzes in detail the most important processes that took place during the different oil eras. This book could turn into a practical guideline for anyone, interested in the global energy map, geopolitics behind it and the economics that shape every aspect of oil policy. Furthermore, the boom-and-bust cycle of oil through the last two centuries is great example of the laws of supply and demand, and why and how the key players influence it. This book will be useful for everyone interested in energy economics and energy diplomacy.
June 28, 2017
I received this book, for free, in exchange for an honest review.
I think I can sum up this book in one number 25% (the percent of the book dedicated to references).
As that number supports, the author clearly has done a great deal of well though research on oil's volatility and that is my main takeaway (that this book adequately describes the factors impacting oils volatility as well as any book can).
The writing was understandable to me and I have a relatively little fiscal background and negligible oil knowledge. The story is written chronologically and as such you can see the same dynamics repeating themselves. This lead to a good deal of redundancy, which usually irritates me. However, in this case I think I justified it as I am hoping that the redundancy will help me remember the key characteristics of the players in this field and people in general.
I think I can sum up this book in one number 25% (the percent of the book dedicated to references).
As that number supports, the author clearly has done a great deal of well though research on oil's volatility and that is my main takeaway (that this book adequately describes the factors impacting oils volatility as well as any book can).
The writing was understandable to me and I have a relatively little fiscal background and negligible oil knowledge. The story is written chronologically and as such you can see the same dynamics repeating themselves. This lead to a good deal of redundancy, which usually irritates me. However, in this case I think I justified it as I am hoping that the redundancy will help me remember the key characteristics of the players in this field and people in general.
May 15, 2017
This book is an excellent walk through oil price volatility from Rockefeller to OPEC and US shale markets. There are interesting questions at the end of the book, which are rhetorical in nature, but the author gives a decent shot at answering. This is a very decent, albeit broad, history of the industry.
September 24, 2017
Pretty interesting read regarding the historic volatility of oil prices. The book spans from the 1850's to present day. In particular, I enjoyed learning about Rockefeller's dominance as well as OPEC's role in the global market today. With so many factors in play, the book leaves the reader wondering how commodity prices will behave in years to come.
July 30, 2022
This book helps me make sense of what I am learning about the current state of oil prices: super-cycle, supply vs demand, the new concept of Wall-Street imposed capital discipline, demand destruction, and spare capacity. With understanding comes profit, I hope!
April 22, 2025
History of the oil industry
Thorough look at the history of the oil industry until 2014. An extra chapter to cover recent activities would be quite interesting..maybe already exists
Thorough look at the history of the oil industry until 2014. An extra chapter to cover recent activities would be quite interesting..maybe already exists
July 29, 2018
Good history
A good history of the variation in oil price that will give some context to the price concerns in the current period where everyone is freaking out.
A good history of the variation in oil price that will give some context to the price concerns in the current period where everyone is freaking out.
September 18, 2018
This is outstandingly well researched and very informative book.
November 15, 2022
I thought this just just another book but it does broadened my perspective. Highly recommended, especially for energy commodity investors.
June 22, 2024
Excellent entry point into the history of crude markets and what drives pricing in this sector.
November 9, 2024
I appreciate the wealth of data (some novel) in this book, but the narrative is quite dull. The Prize (extensively cited) is a vastly better read.
March 1, 2025
Overraskende at en bok om oljeprisen kunne være den jeg har syntes det har vært mest gøy å lese i det siste. Takk Nico!
Displaying 1 - 15 of 15 reviews