from Energy Security and Climate Change Program

CFR Expert Blake Clayton Proves Oil-Market Anxiety Is Irrational in New Book

Over the last hundred years, many experts have fallen prey to fears that the world’s oil is dwindling and prices are doomed to rise, yet such predictions have repeatedly proven wrong, writes Blake C. Clayton in a new CFR book. Market Madness: A Century of Oil Panics, Crises, and Crashes offers important lessons for Washington and Wall Street about energy policy and financial markets. Buy the book »

February 12, 2015

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As oil-market turbulence persists, a new Council on Foreign Relations book shows that over the last hundred years, many experts—including U.S. officials—have fallen prey to fears that the world’s oil is dwindling and prices are doomed to rise.

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Such predictions have empirically proven incorrect, writes CFR Adjunct Fellow and Citigroup Analyst Blake C. Clayton in Market Madness: A Century of Oil Panics, Crises, and Crashes. Technological advances and geopolitical shifts have repeatedly prompted sudden, severe drops in oil prices—exactly like the one we are experiencing today.

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From warnings of oil-supply exhaustion during the Roosevelt era and World War II to the pessimism of the 1970s oil crises and predictions of “peak oil” just a few years ago, Clayton recounts how “this cycle of hope and pessimism has influenced the way people think about oil, from the street corner to the Oval Office.”

Market Madness offers important lessons for Washington and Wall Street about energy policy and financial markets:

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  • Never underestimate the market’s power to wring abundance out of scarcity.
  • The oil trade is marked by discontinuity. “Dramatic, unexpected changes over time are the rule, not the exception.”
  • Basic truths about how markets workwhat drives supply up and consumption down, for instancehave proven astoundingly reliable, time and again. “New era naysayers who claim that the ‘old’ laws of economic gravity no longer apply have usually found themselves on the wrong side of history.”
  • The best defense against unfounded worries is good data. “Improving transparency, within both the physical and financial oil markets, holds the largest potential for decreasing unwarranted price volatility and making certain that retail prices reflect economic fundamentals.”


“Market Madness is a provocative and persuasive book about one of the least well understood—and yet most economically consequential—markets of our time: the global oil market. Blake Clayton has made a timely and significant contribution to the debate about the future of energy, with a warning about forgetting the lessons of market cycles past that applies equally well to Washington and Wall Street.”

Jason Bordoff, Professor of Professional Practice in International and Public Affairs and Director, Center on Global Energy Policy, Columbia University

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“Blake Clayton has produced one of the finest energy books I have ever had the pleasure of reading. His warnings about the danger of group think on prices and peak oil are a tour de force. This is a tome that will rank with Daniel Yergin’s The Prize as an icon in the field.”

Charles Ebinger, Senior Fellow, Brookings Institution

“Market Madness is a landmark study of the oil market that is a must read for investors and policymakers alike. In a thoughtful retelling of a century’s worth of oil market highs and lows, Blake Clayton captures one of humanity’s finest qualities—its ingenuity—while documenting the hubris and biases that have shaped human behavior and markets for generations.”

Greg Sharenow, Executive Vice President and Portfolio Manager, PIMCO

“Cycles in world oil have a profound impact not only on the global economy and geopolitics, but also on national policies and on how people think about energy and the future. Blake Clayton tells a fascinating and lively story about the cycles of panic about “running out” of oil. He demonstrates a strikingly recurrent pattern—from Theodore Roosevelt’s thundering about the “imminent exhaustion” of oil in 1908 to the passions of the “peak oil” theory of just a few years ago. Of course, the future is not guaranteed, but Clayton makes clear that forgetting the patterns of the past is one of the great risks when dealing with whatever are the crises and disruptions of the future.”

Daniel Yergin, author of The Prize and The Quest: Energy, Security, and the Remaking of the Modern World


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