– Chapter 2 –
The Anatomy of Oil’s Booms and Busts
If you were an oil man in 1980, you were considered the smartest guy in the room. Oil prices had climbed from around $3.39 per barrel in 1970 to nearly $35 per barrel in 1980 – a 10 times boom in just 10 years.
And the guys who paid attention got rich.
These guys had big houses. They drove big cars. And they wore Rolexes.
They started their own companies left and right. It would have been stupid not to, wouldn’t it?
And everyone – I mean everyone – borrowed money.
It couldn’t hurt, they thought. Any money they borrowed they’d make back 10 times over. But that’s the fallacy with us oil guys. We are optimists. Every day is brighter. The big one is just one more well away. No one plans for lower prices. We’re too busy making money.
And that’s why, in 1981, no one was prepared for the crash.
Natural gas prices fell from $9 to $3 in a matter of months. Most companies went bankrupt. No one could pay back what they had borrowed. Half the homes in Oklahoma City – ground zero – were for sale or in foreclosure.
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