trading narrowly, varying by just a few cents either way. Any sign of a shortage, and the price may rise to around $30. A serious shortage can cause this swerving, volatile market to lose all sense of caution. When Iraq invaded Kuwait back in 1990, everyone thought the roof had caved in, and on one lunatic day at the International Petroleum Exchange (IPE), Brent Crude hit $70 a barrel.
Today the atmosphere was fraught. Captain Tex Packard’s ship was still on fire in the strait, and in London nervous representatives of the big oil producers, refiners, shippers, distributors and marketers mingled with other major users. Brokers representing the power generators, airlines, truck fleet operators, chemical companies and even supermarkets were on tenterhooks. The world’s most eminent money men from houses like Morgan Stanley were massed along with everyone else on the packed hexagonal-shaped trading floor, with its tiered pits, video surveillance and colossal security.
The previous night, Brent Crude had closed at $28 a barrel, up three bucks. And West Texas Intermediate in New York was tagged at a few cents below. Today cell phones were running up massive bills connecting the U.S. traders with London, long before the opening bell at NYMEX. What mattered right now was the opening bell in London, and the traders, wearing their identifying colored jackets, red, yellow, green or blue, thronged above the pits as the clock ticked on to 10 o’clock.
Bang on time it rang, signaling the floor was open for business, trading at first in natural-gas futures, the prices for which would explode before this day was done.
One minute went by, and then the clock hit 10:02 and the second opening bell rang sharp and loud, for the initial trades of Brent Crude Futures, the world pricing benchmark; at which point, on this day, the entire system of international oil commodity trading went berserk.
Pandemonium broke out as buyers yelled “PLUS TWO…PLUS TWO!” But these weren’t cents, as in the regular cries of “
“Mother of God!” breathed the broker for Shell. And the trader for a New York Bank roared “PLUS FIVE…PLUS FIVE FOR 500,000….” Which pegged the price of Brent Crude Futures at an astounding $45 a barrel.
Dealers left behind in the stampede for the best prices surged forward as a rumor swept the pits that the price was going to $70. Brokers for the big finance houses huddled together, uncertain whether to chase the price up further, or whether to wait for the retreat some thought might not come. At least not on this day.
Snatches of conversation fired the desperate atmosphere. Yelling, classless British voices from London, interspersed with louder American tones…. “
Five minutes later the price hit $50 when a Rotterdam trader bid on a precious cargo of Shell crude currently on its way to Scandinavia. For a brief four minutes the price hung and then faltered at around $50. Then a rumor swept the floor that a major fleet of minesweepers from the Indian Navy was under escort moving up the Arabian Sea to the strait.
The price of Brent Crude Futures hit $55 in 42 seconds. And by now it was impossible to hear anything above the thunder of the pits as the traders piled in, bellowing bids for any available crude oil already free of the confines of the Gulf of Iran. On a normal trading day, 50 million barrels changes hands in this room. In today’s uproar, almost 30 million were traded in the first 45 minutes. There was only one thing worse than paying through the nose for oil, and that was not having any.
“
By 11 o’clock that morning the price of world fuel oil had doubled. By the close of trade it stood at $72. Up over 150 percent. No one in the International Petroleum Exchange had ever seen anything like it. In New York, West Texas Intermediate had
Admiral Morgan stared at the pile of data before him. The minesweepers were in action in Hormuz, and there was no doubt the field was composed entirely of Russian-made PLT-3s. So far as the Indian commanding officers were concerned, they were looking at three lines, less than half a mile apart. Inshore on the Omani side, they were in deep water, and it looked as though the same three lines stretched clean across the strait to the Iranians’ Sunburn missile site. Lieutenant Ramshawe had thus far been correct in all of his assumptions.
But now the tasks facing Fort Meade were different. Question One was Where is China now deploying the warships? The Kilos appeared to have disappeared from the face of the earth, but the two frigates that had been flying the national flag of Iran had been picked up by the overheads traveling toward China’s Burmese base in the Bassein River. The
Quite frankly, the Chinese completely baffled the President’s National Security Adviser. For a start, he had no idea what they hoped to achieve by providing the hardware for the Ayatollahs to mine the Strait of Hormuz. Nonetheless they had plainly done it, and the Western world along with Japan and Taiwan, and to an extent South Korea, was presently in deep trouble. The world would run out of oil in a matter of weeks if the Gulf of Iran was not opened up very quickly.
The Chinese obviously thought they were immune to this chaos, and in Arnold Morgan’s opinion they must be taught a very sharp lesson. It might be possible to tweak and irritate the United States, but when you start tampering with the national interest of the world’s one superpower, you might very well end up in deadly serious trouble. Nonetheless Admiral Morgan was determined not to overreact until he could ascertain what the men in Beijing were doing.
Not so the President. He went into a complete dither as world oil prices went into some kind of meltdown, or rather a meltup. Constantly on the line to his Energy Secretary, Jack Smith, he kept asking, over and over, “But what’s this going to mean for the average American at the gas pump?”
As early as midafternoon, answers were coming in fast and furious. And they were all the same. Up, up, and up again, as the big gas-station chains found themselves paying fortunes for every barrel of crude oil on either side of the Atlantic. West Texas Intermediate looked set to close even higher than Brent Crude Futures. And still Big Tex Packard’s mighty tanker blazed alone out in the strait, lighting up the waters. When the gusting wind swung back around to the northeast, it sent a gigantic black oil cloud into the night skies above Arabia.
In a week when gas prices could very easily hit three dollars a gallon at the pump, or even three-fifty, President Clarke faced rampaging inflation on a scale that would send the Federal Reserve into shock. Every commodity and product in the USA was going to suffer because of drastic increases in transport costs. Taxis, buses, diesel freight trains, interstate trucks, airlines, especially airlines, anything that moved was going to be hit.
And that was not the worst of it. President Clarke had a vision of the ultimate national uproar. The United States starting to run out of oil, with no time to tap its own deep reserves. High gas prices were one thing. No gas at any price was entirely another. If the country ground to a halt, his name would surely be remembered as one of the most ineffective Presidents in the entire history of the nation. And what the hell was his oh-so-brilliant National Security Adviser doing about it? As far as he could see, a big fat zero.
He picked up his phone and asked a secretary to have Admiral Morgan report to him instantly. Two minutes later, Arnold came growling in through the open door to the Oval Office.
“You wanted me, sir?”
“Admiral, what the hell are we doing about this standoff in the gulf?”
“Sir, we got a minefield across the Strait of Hormuz, as I explained. The gulf is now shut. The Iranians are saying nothing, admitting nothing and they sure as hell aren’t about to clear it. Neither are their buddies in Beijing.
“That means we have to clear the minefield ourselves, and the Indian Navy, working on our behalf, began that process several hours ago. They have six minesweepers, under our protection, locating and exploding the mines. But it’s slow, and there’s a lot of them. I understand they have attended to three so far, and my guess is forty still to go, in order to secure safe passage for essentially defenseless tankers. There’s already an
