Deja Vu

Busted!

Tags:

H. G. Bissinger,

Iraq War,

natural resources,

oil,

Texas

“Big Oil Projects Put in Jeopardy by Fall in Prices,” The New York Times, Dec. 15, 2008.

Oil markets have had their sharpest-ever spikes and their steepest drops this year, all within a few months. Now, with a global recession at hand and oil consumption falling, the market’s extreme volatility is making it harder for energy executives to plan ahead. As a result, exploration spending, which had risen to a record this year, is being slashed.

The precipitous drop in oil prices since the summer, coming on the heels of a dizzying seven-year rise, was a reminder that the oil business, like those of most commodities, is cyclical. When demand drops and prices fall, companies curb their investments, leading to lower supplies. When demand recovers, prices rise again and companies start to invest in new production, starting another cycle.

As familiar as the pattern may be, the changes this time are taking place at record speed. In June, some analysts were forecasting oil at $200 a barrel and companies were scouring the earth for new places to drill; now, no one knows how low prices may fall.

Friday Night Lights (excerpt), by H. G. Bissinger, 1990.
After predictions that the eighties economy would push the price of oil into the neighborhood of $100 per barrel, the Texas petroleum industry crashed. In 1985, oil sold for $27 per barrel; by January 1986, the price per barrel had dropped to $10.

Of all the deals that Aaron Giebel had made from his base of operations in Midland during the boom, the hardest part, by his own account, was figuring out which one was the worst.

Had the five planes, and the three full-time pilots to fly them, really been necessary? Should he have paid cash for the thousand head of hybrid cattle? Did he think it through as carefully as he should have when he took a multi-million-dollar position on a method of breeding “super cattle” by hormone injection and embryonic implant? Had it been reason enough to pay $17.5 million for the seven-thousand-acre ranch in El Indio with the palm trees that had been flown in and the private runway and the breathtaking view of Mexico when he used it largely for entertaining and hunting? Should he have planted the twenty-eight thousand pecan trees when the only thing he knew about pecans was that “they’re all named after Indians?” Had it been such a wise thing to go into the home construction business with his former son-in-law and end up with a loss of $1.2 million? Had he really needed the trucking business that cost him $4 million to move drilling rigs in and out of the oil field? Had he been slightly impulsive when he decided to open five additional offices in San Antonio, Oklahoma City, Denver, Calgary, and Lafayette, Louisiana? Had the revolving $24 million line of credit over at the First National Bank of Midland truly been a good thing after all? Was it possible to have built a new house that wasn’t thirteen thousand square feet?

It was all so hard to know.

By the time you added it up, Aaron Giebel’s losses from boom to bust totaled somewhere around $55 million.

He had filed for bankruptcy, and by 1988 he was back on his feet again, in the oil business, although on a far reduced basis. He still had his wife and he had his health, which was more than he could say for a lot of his friends, who lost both when the absence of money for impulsive trips to Paris suddenly made them seem a lot less attractive. He was the first to admit there was no justification for what he had done, except that he had gone literally mad in Midland. But he spoke about it with candor, as if he saw a danger in what had happened that needed to be exposed, materialism and a desire for money and wheeling and dealing that became as impossible to resist as any addiction.

“There was a euphoria round here that was almost like an opiate,” said Giebel. “It was an opiate. And I succumbed to it. And I don’t know a guy who did not.

“You just get caught up. You get caught up in the euphoria, like you’re sitting down at the gambling table.”

For a period of time Giebel had actually resisted it. By nature he was a careful man. He had a round, soft face with eyes that seemed incapable of anger, and there wasn’t anything remotely swaggering about him. He spoke softly, without the twang that in some seemed to reverberate from one end of the state to the other. Born in Fort Worth, he had moved to Midland after college and ultimately became the chairman and chief executive officer of the MGF Oil Corporation. The company grew enormously during the boom, and when Giebel resigned in 1979, he did so with millions of dollars’ worth of stock. He had resolved not to build another oil company, but he did, A. F. Giebel Petroleum Consultants. With the price of oil skyrocketing, Giebel found himself worth $100 million. He still restrained himself from other investments, but as he saw friends everywhere expanding, he wondered if he was not crazy to do the same. “I felt that I was behind the progress curve. I was demeaned by my peers—‘Giebel, you rich dog, what are you gonna do, eat it?’”

That got to him. In Texas, no man was more of a coward than the one who was chicken shit with his money.

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