In 1863, with the first American oil boom “at full tilt”, Andrew Carnegie had an epiphany: the world would soon run out of oil. He and a partner “decided to dig an enormous hole, capable of holding 100,000 barrels of oil”, where they would stockpile crude “until the worldwide oil shortage had struck”. When that happened, they’d be rich – to be precise, they’d be millionaires.
As Blake Clayton recalls in his awesome new book Market Madness: A Century of Oil Panics, Crises, and Crashes, they then waited. “And waited. But the long-awaited shortage never came. The only thing that did arrive was evaporation, which kept skimming more and more oil off the top of the lake.” Carnegie, writing fifty-seven years later, “noted wryly that the shortage… still had ‘not arrived’”.
I’m not an impartial observer – Blake did much of the work on this book while he was a fellow with my program at the Council on Foreign Relations, where he’s still an adjunct – but don’t let that lead you to discount my enthusiasm. This is a fascinating book: it’s simultaneously an entertaining story of four peak oil scares (and how they end) stretching back over a hundred years; an analytically serious book about behavioral finance that helps explain how markets can often be incredibly wrong; and a careful look at how policy makers manage – and mismanage – energy strategy in the face of uncertainty and fear.
In any case, don’t just take my word for it. Dan Yergin calls the book “fascinating and lively”. Greg Sharenow of PIMCO calls it “a landmark study that is a must read for investors and policymakers alike”. And Charley Ebinger predicts that it “will rank with Daniel Yergin’s The Prize as an icon in the field”.
Don’t bet against that. You can buy the book here. And, in a year or so, you’ll probably want to buy the paperback too – its epilogue about the latest oil crash is bound to be a must-read.