“They have locked in the Venezuelan crude market,” observed the senior broker while discussing the day’s activities with a CNBC reporter at the Chicago Exchange.
“Does this happen often?” The reporter inquired.
“About once in a lifetime and this is it. The programmed buying can be vicious. Someone should outlaw it.”
Another broker observed, “We were warned of this in the ’09 bottom when $100 million dollar selling programs caused wild eight-hundred point swings in the stock exchange. It kicked in everyday at a quarter-to-four like clockwork and nobody seemed to care. Does anybody care today? If you want gas for your drive to work tomorrow you might begin to care about these freewheeling markets that run on ten percent margins.”
Robinson was about to give a briefing to the president when Stefano Morrell, the Secretary of Energy burst into the Oval Office. “We have a big problem! You must call the president of Venezuela now!”
“Hold on and tell me what is going on.”
Robinson handed Morrell a cup of water and indicated that he should sit beside him.
After a few sips he was able to speak. “Our Venezuelan oil has been bought out from under us.”
“How can that happen?”
“You would need to ask someone who understands the futures markets. I don’t understand the intricacies of the markets. It really doesn’t matter.”
Robinson was trying to make sense of it. “Who bought the oil?”
“We think it is the Chinese. It began three minutes before the close and everything went belly up by the time the bell rang.”
“The Chinese bought our imported oil from Venezuela?”
“Yes, they locked it all in and we will receive less than twenty-percent of our regular deliveries.”
“When is this stoppage going to take place?”
“It will be a month before we will be cut off.” He paced the floor wandering all over the Office. “However if you can somehow cancel the contracts by talking to the president down there then we could get our crude.”
“I need to talk to the Chair of Economic Advisors — that would be Linda Cramer. She understands this sort of thing. What do you think of this Houston?”
“We need to talk to Cramer before you make any phone calls. You need to know what we are dealing with here. Let’s turn on the TV as it is probably all over the news.”
The president pushed the remote and could see the panic on the CNBC stock market report.
A reporter asked the pit boss, “What does it mean for the price of gas tomorrow?”
“In theory it should make little difference, however in actual practice the average guy on the street is going to panic. The station owners are going to anticipate the worst and prices will probably be all over the map tomorrow. If these contracts go down to the wire then we will have a disaster — our economy will come to a screeching halt.”
Another chimed in, “We need the oil being held hostage in the Indian Ocean and now we need the Venezuelan oil. This is a double whammy. How much more of this can we take?”
Linda Cramer was on the line. “What can I do for you?”
“Are you aware of the oil futures market fiasco this afternoon?”
“I’m watching it on CNBC now. I just tuned it in and it sounds like a disaster is headed our way.”
“Do you have any recommendations or anything I should know about this? I have been advised to call the president of Venezuela and see if the two of us can nullify the contracts.”
“I can call my people together and see if we can come up with any recommendations, but your idea is very likely where we will end up. If the Chinese bought the futures contracts as reported, you could contact the Chinese traders who made the purchases and offer to buy the contracts. They would want to make a profit and sensing how badly we wanted the product would probably gouge us badly. Figure they invested heavily in an oil coup and plan to reap a profit for their efforts. To them it’s a business. The only problem with that idea is they may have a loyalty to the Chinese government and refuse any offer you would make. If the Chinese government is involved it could be they need the oil desperately and planned this coup to obtain it. They would not sell at any price in that instance.”
“Anything else?”
“No. That is about all I can come up with off the top of my head. I’ll call you if anyone comes up with a brilliant idea in the next hour. I’ll have my members together within the half hour and work on this all night and send a report to you at six this morning.”
“That sounds good Mrs. Cramer. Keep close to your cell phone in the event I have other questions.”
“Sounds good.” The line turned to dial tone.
Landenberger said, “We need to figure out whom to contact to purchase those contracts.”
Robinson called his secretary and instructed her to make some calls and get the White House staff working on it. “I think we may have a better chance with the Venezuelan president as the Chinese government is probably behind this and they want the oil. Something this big took billions and few individuals have the resources to pull off something like this.”
“In any event it would be nice to know where we stand with Rio. Let’s see if we can get him on the line and try to get a sense of where he stands on this.”
“Let me talk to him for a minute as we met the day he took office and then you can get into your discussion with him,” offered Robinson.
“Sounds fine — you can get him warmed up.”
Landenberger placed the call on the speaker.
“Hello President Rio — this is Houston Robinson.”
A cheerful voice responded, “My American amigo. How are you?” After a minute of recalling the previous meeting, Robinson said, “I have President Landenberger here with me and I thought the two of you would like to get acquainted.”
The three chitchatted for a minute, talked about the oil coup in the trading pits, and the president posed the question. “I am quite concerned about this as our country needs oil because of the tanker hostage situation in the Middle East. The timing on this could not be worse. Is there anything you might do to intervene such that we get that oil next month?”
“I would need to talk to my people down here as I am afraid I do not understand the intricacies of how this could happen. I’ll do what I can of course. It could be that Santiago would have done something that I would not consider. He was a ruthless man, but I am not. We are becoming more democratic with every passing day and the power of one man to interfere with everyday business diminishes as I speak.”
“It is good of you to look into it.”
“You may wish to look into your trading system which appears to have worked against you in this instance. You should have protections in place to see that it does not happen again. Such is life that we too often learn from our mistakes — is not that true?”
“Yes it is often true.” Landenberger could see that nothing was going to come of this — at least right now. He repeated his need for the oil and hung up.
Robinson said, “The worst thing he could say was ‘no’ and I think we heard that.”
“It was worth a try. Without a call we would have always wondered. Hopefully we will find out who bought all the contracts and can purchase the oil we need.”
It was not pretty.
Some said it was a bloodbath of immense proportions.
The following morning the oil pits around the world reached dizzying heights as oil contracts were sucked up by governments competing for the remainder of the available oil. Stock prices went south and nearly half of the world markets traded at new lows for the year.