“What’s going on?” said Martin. “You’ve met someone.”
“No, no I’m not saying I’m having an affair. I’m just saying we need a break,” said Liz.
“Come on what’s going on? Really. What’s going on?” said Martin, looking her directly in her eyes.
“Well, this isn’t a newsflash Martin, but I just think you’ve lost your edge. You’re not the same guy I married. You don’t want to do things or go out with friends. It doesn’t seem like you’re going anywhere with your job. I just want more, Martin. I want to live, really live my life, even if you’re content on just getting by.” Liz stopped and waited.
“I’m working my ass off!” said Martin. “I don’t like your “cool” friends from the Houstonian. I’m fine hanging around the house with my family.”
“I wasn’t going to get into this; I was just putting the separation idea out there,” said Liz. “But the truth… is we’re not going anywhere. We’ve lived in the same crappy house for fifteen years. You go to bed at nine o’clock and you won’t even think about interviewing for another job.”
“We’ve got bills to pay! I can’t just randomly look for a new job. We’d lose our unvested stock if I left!” Martin was angry. “I go to bed because I’m fucking tired from working all day.”
“You are better than this, Martin. Tell your boss to screw himself if they won’t make you a VP. You’re the best damn geologist at the company and you know it. Fight for it—they’re not going to just hand it to you.” Now Liz was angry, too. She’d had enough. They had been over this.
Martin changed course. “Look, I don’t think our life is that bad. I like our house. I know it needs some updates, but we can do that. I like our neighborhood. The kids are doing great in—”
Liz wasn’t taking it again. “Look Martin, all of this might be good enough for you. But for me, getting by isn’t good enough any longer. Period.”
Martin looked at her carefully. It was clearly his move. He knew it didn’t work to push Liz—she just pushed back. “I guess I would say, you have an interesting way of introducing the idea of divorce.” He looked across the room and picked up his menu. “I guess this conversation is to be continued.”
CHAPTER 5
The foundation for the glory years of crude oil trading began being laid in the summer of 1973. In August, Petroleum Intelligence Weekly reported that “near-panic buying by US, European independents as well as the Japanese” was resulting in “oil prices sky-rocketing.” In the U.S. alone, oil imports stood at nearly 6.2 million barrels per day compared to only 3 million barrels per day just three years earlier. For twenty years, the Arabs had threatened to use oil as a weapon to stem the influence of Zionism around the world and fight back against American Imperialism. Now was their chance. With the 1973 Arab-Israeli war, the disruption in production, the embargo and the panic in gas lines in the United States, the world was set for one of the strongest economic shocks of the century. Oil prices went from an astoundingly low $2.80 per barrel to nearly $20 per barrel in the open market. The official price was finally set at $11.65 per barrel. At the end of the day, the major oil companies banded together to form a managed market with Arab suppliers, and a nervous path of seemingly stable operations was preserved.
In 1979 fortunes were to be made. With the Shah sent into exile in Iran, five million barrels of oil a day disappeared from world markets. This time, a total disruption in world supply lines was scattered unevenly across companies and countries. Then with the Three Mile Island incident, the threat of freezing homes, fuel rationing and anarchy sent prices this time from $13 per barrel in early 1979 to nearly $40 dollars per barrel in early 1981. By trying to restore order and balance, and with the politically-correct intention of harnessing Big Oil’s obscene profits, legislation was enacted to limit the margin that a company could make in the purchase and subsequent sale of a barrel of oil. In addition, in order to balance now short supplies on an equitable basis, an artificial allocation system called “entitlement” was put in place, which allocated oil on a pro rata basis using prior years’ demand profile. Predictably, the governments around the world—most notably in the U.S.—failed miserably in their attempts to legislate fairness and equity in the world oil market. In some cases, the consequences were almost laughable. Small- and medium-sized refineries, which for years had been at best marginal operations, now had a “grandfathered” right to buy an allotment of tens or even hundreds of thousands of barrels of oil a day at official prices substantially below open market. They could then sell these barrels on the open market and turn large profits—much larger profits than they could make running an outdated, inefficient refinery.
Out of the chaos was born a new breed of oil trader. For years, U.S.-based oil trading operations had acted as mere third-party service companies to clear market imbalances for oil producers and consumers. Many of these traders were given a government entitlement to buy or sell hundreds of thousands of barrels each day based on their prior years’ business activities. They often owned no refining capacity, and they never did have the desire or the capability to take physical possession of the product, but this entitlement made them rich and powerful. Offshore independent trading houses, and a few dozen offshore corporations, soon began to represent countries from the Middle East, Africa, and Latin America. These trading companies were set up as shadow operations providing legal entities that acted as clearinghouses for establishing, transferring, and cleansing the title on cargoes of oil from sources wishing to remain anonymous. Some crudes, such as those from Iran, were officially under embargo by the U.S., but a good trading company could take possession of that crude and get a seemingly clear title to it.
Oil price controls were established in many countries in an attempt to control speculation. In the regulated market, areas such as the United States set a profit limit of perhaps thirty cents per barrel on the spread for each transaction. This meant that if a company purchased a million-barrel cargo at, say, $17 per barrel, they could, in turn, sell it for no more than $17.30 per barrel, limiting their trading profit before expenses to only $300,000. However, a savvy oil trader might arrange to pass these cargoes through a series of buy-and-sell transactions within the crude oil trading “fraternity,” and a given cargo could ultimately be returned to your company with a legal chain of title after it appeared to have changed hands four or six or eight times. This process would enable you to buy it back now for $19.70 per barrel and subsequently sell it for $20 per barrel. This gave the original owner of the cargo a beginning-to-end, trading profit of $3 million on the cargo instead of $300,000. Such a string of transactions could be made quickly and easily, with just a telephone and a telex machine. Hundreds of such chains could be in progress on any single day between the traders, most of whom were on a global, first-name basis. Meanwhile, the huge oil tanker moved steadily and quietly over the water on its thirty-five-day journeys from the Middle East to Baytown or Baton Rouge, or St. Croix or New York.
The traders who directed such activity shared uncommon tenacity and ruthlessness. With this ruthlessness came money and power. Self-assuredness. They always lived on the edge of the law, often, clearly above the law. Among themselves was a world of cold-blooded integrity, where a phone call, or a nod of the head, was enough to settle on the purchase of twenty or thirty million dollars’ worth of oil. Paperwork to follow.
Eventually, the government came to understand the dark ways of the traders. They knew that their system of controls and price limits and regulation was not working. They launched inquiries. Senators formed Committees. Representatives held hearings. Prosecutors filed injunctions. But finally, after years of fruitless effort, the agency officials, special prosecutors, legislative panels, and judicial subcommittees packed up their charges, and their unraveled research, and gave up. By then, the traders, like jackals—those willing, and in many cases needing to live on the edge—simply moved on. Such a man was Hilton Sinclair. Houston- and global-oil tra
der.
CHAPTER 6
Martin was deep in his dreams, deer hunting as a kid in northern Wisconsin, when he suddenly jolted back rigidly in his seat at the crack of the rifle. But it wasn’t a rifle at all. The plane was taking on ice, and thankfully the deicers had come to life. As the wings heated, the ice had begun falling away in sheets. An occasional sheet of ice would catch the propeller, and it would be hurled violently against the fuselage of the plane with a deafening crack. It sounded like the whole damn plane was breaking apart as it lunged forward through the wintry black of night. A prayerful silence filled the cabin and Martin realized he had been the only one tired enough—or foolish enough—to sleep.
Now the captain, the old man, was sitting straight-backed in his seat, cradling the yolk of the craft in a tender embrace. About every thirty seconds, the boy at his side would reach across the glass in front of him and, using a navy-blue blanket, he would wipe away the condensation and fog that was gathering on the inside of the cockpit window. It took a moment for Martin to see that the wipers were, in fact, on. They were bundled in ice, laboring piteously in a battle to keep the glass clear. Now Martin was worried.
“Lacrosse Tower, Otter one three five seven Tango, two four miles north at 11000 heading one seven zero. Over.” Even from his seat, Martin could see the knuckles whiten on the co-pilot’s hand as he clenched the radio mike.
“Roger five seven Tango, we’re open for business.” The response was so cheerful that Martin could almost smell the hot coffee brewing inside the warm, snug traffic control tower two miles below.
“We’ve got a problem with our cockpit defog and de-ice. We’re losing visual, and navs are erratic. Request clearance to 3000 now, over.”
“I copy you, Tango, authorized now for 3000.” The voice on the other end had gone dead serious. “Be careful. We are IFR only with light rain and ground fog. No sleet, repeat, no ice. No known local traffic in area, over. You boys are the only ones crazy enough to be up there.”
“Roger that, Tower, on our way to 3000 now. Will report at the three-mile marker. Out.”
Without looking, the young pilot returned the mike to its Velcro holder and vainly wiped the old navy-blue blanket across the glass again.
“Five seven Tango,” replied the tower. “Good luck.”
Luck. So now it was coming down to luck, thought Martin. Lately, he had not enjoyed much luck. He had seen it coming a mile away, yet when Liz said the word “divorce,” he just sat helplessly as she went over all of the soul searching, all of her concerns, all of her struggles with what was the right thing to do. Now he sat helplessly again staring emptily as the amber lights reflected off the intense faces in the cockpit. He had not really spent much time thinking about how he might die, or even how he might live. Suddenly, another rifle shot echoed as the plane lurched without warning, prompting shrieks from the passengers.
His first thought was that they were going down, and they were. They weren’t necessarily going to crash; but the immediate and abrupt way in which the old man took her down to a lower altitude convinced Martin of the immediate danger. Martin understood the problem and he understood the plan. The deicers on the cockpit windows were not working, and the ice was building up across the top front of the plane. This was fogging up the cockpit windows and beginning to ice over the navigational sensors required to measure basic functions like airspeed, altitude, and direction. Very soon, the pilots would not be able to see, and they would lose their sense of direction. The pilot had bet that he could get to a lower, warmer altitude before he lost navigational instrumentation. Even Martin calculated that it ought to be nearly twenty degrees warmer at 3000 feet. It had always amazed Martin on international flights when temperatures routinely got to sixty or seventy degrees below zero at thirty or thirty-six thousand feet elevation.
As the seconds ticked by, they continued to descend. At last, the plane leveled off at three thousand feet. Then they waited. Thankfully, the sleet turned to rain. Through the patchy fog they found themselves gliding over the mercury vapor lights scattered across the fields and hills of the houses and farms of Minnesota and Wisconsin. Far to his left, Martin could discern the outlines of what he believed to be Winona, Minnesota. Ahead of him, he could see the glass in the cockpit starting to clear.
“Lacrosse tower, one three five seven Tango now three miles north at 3000, bearing one six zero. Request clearance to land,” the young co-pilot stated dutifully.
“Roger, Tango,” cracked the tower. “Welcome back, guys. Kind of a rough ride tonight.”
“Roger, Tower,” said the veteran pilot, “rock and roll for a while, but now we’re out of the freezer.”
“You’re cleared straight in on runway one eight zero. I’m bringing on the ILA for you at 2500 to bring you through the ground fog. We’ve got a few ice patches on roll out. Tower over.”
“Copy, Tower, ILA at 2500. We’ve got visual now. Ice patches on roll out, over.”
The flashing ILA strobe lights on approach gave a queer brilliance to the dense fog that seemed to overwhelm the tiny craft. Soon they fluttered over the threshold of the runway. The plane seemed to hesitate as the pilot cut back power, and then, like a tired warrior, the plane dropped to the runway and pulled up to the official terminal building of the Western Wisconsin Tri-State Regional Airport in Lacrosse.
CHAPTER 7
Hilton had been at Prolea almost two and a half years now and he still couldn’t stand the damned French. They didn’t come down from New York very often, and never stayed more than two nights. But each time they came, it took Hilton a little more time and a little more scotch to recover from his latest round of interrogation. He’d never met a trader worth a damn anyway who couldn’t drink his weight in scotch.
“So, Mr. Sinclair,” said Gerard, peering over his pewter-rimmed glasses. “what do you believe is the basis for the buildup of our East Coast fuel oil position over the last six weeks?”
Alain had been the one to hire Hilton, and both had agreed that Hilton was the perfect man for the job. Now Alain had moved to a new job, and Hilton was stuck dealing with Gerard. Shortly after coming to terms with Hilton, Alain had been offered an opportunity to run the French operations for Latin America-West Africa, Prolea’s largest operating unit. Gerard showed up three weeks later.
For the first eight months, Gerard had been respectful—almost reverential—toward “Mr. Sinclair.” He didn’t know anything about the business at first, but he asked a lot of questions, and soaked up information. At first, Hilton found some of the questions almost comical, but Gerard had stayed out of the way. He never offered advice, and as long as Hilton’s people sent him plenty of reports to look at, Gerard seemed content.
During the first year with Gerard, the market had been quiet, but that was soon to change. Over the next eight months of the Gulf War, Hilton’s unit had made $360,000,000 net income. During this time, Gerard had become increasingly involved in the business, and frankly, Hilton had appreciated his help. Together, they had gone before the board of the parent company in Paris to lay out their strategies, beef up their financing, and successfully secure higher trading limits to support their positions during the Gulf War. As the war wound down, Gerard had gotten credit from Paris for his astute oversight of the trading unit; and, in turn, Gerard had become downright friendly, almost jocular, with his new American colleague, “Heelton.”
Financially, Hilton’s first year at Prolea had been break-even. He got a nice salary, but no bonuses. During his second year, that all changed. His employment contract with Prolea had paid him over a million dollars in bonuses. He needed the money, too. He was on his third wife and he had a huge house in River Oaks. Among other things, he had just bought a new sailboat that he kept down in Clear Lake. Now, that seemed like ages ago. Things had changed very quickly. Business had gotten rough again. It was beyond belief to Hilton that Gerard was now treating him like a second-class citizen. It wasn’t just Gerard, either, it wa
s this conference room full of chain-smoking, second-guessing lieutenants that seemed to accompany Gerard on every visit now.
“Mr. Sinclair,” chirped Gerard. “I was asking about your east coast fuel oil stocks.” Hilton jolted back to reality.
“Wel,l Gerard, as you know, we’ve been watching European product inventory levels as they’ve neared historic lows. We see continued escalation in U.S. east coast manufacturing activity.” Hilton spoke carefully. “All of our models are showing latent demand for products moving into strength as we approach winter.”
“But Mr. Sinclair, your laid-in costs on diesel fuel alone are now more than four cents above the New York Harbor market price,” said Gerard, apparently no longer on a first name basis with Hilton. Gerard was glaring from side to side at his fellow Frenchmen who lined both sides of the huge mahogany table. Gerard, too, was clearly under pressure now that things had been rather inauspicious over the past six months. “Who is going to be pleasant enough to pay Prolea four cents a gallon more for our fuel oil than they can buy it on the spot market?”
“For Christ’s sake, Gerard, you know that four cents can be made up in a week when the market is short. Everyone knows that the market is short on product. When things get tight, they just aren’t going to be able to get physical product in fast enough to cover the holiday season, and we are going to clean up. Prices are already starting to climb,” he implored.
Unmoved, Gerard looked down the table and barked to one of his lieutenants. “Mr. Guideau, what was the price on New York Harbor number six fuel oil at opening this morning?”
“Fifty-two and one tenth cents,” snapped the impeccably-dressed young man. He quickly placed his cigarette down to peer at the stack of paper in front of him.
“And yesterday?” Asked Gerard.
“52.45 at close, sir.”
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