Summary of Uncovering the Secret History of Wall Street’s Largest Oil Trade

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Uncovering the Secret History of Wall Street’s Largest Oil Trade summary
Mexico did what other oil-producing countries don’t – and made a lot of money along the way.

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9 Innovation

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If you have never heard of Mexico’s large, annual oil bets, it’s for good reason: Since the early 1990s, the Mexican government has gone out of its way to keep its Wall Street activities under wraps. Javier Blas, chief energy reporter at Bloomberg News, has gone through thousands of pages of government audit reports and other documents in the United States and Mexico, as well as interviewed government officials, traders and bankers, to tell the story of how Mexico has been protecting itself from oil price fluctuations for all these years. getAbstract recommends this piece of first-rate investigative reporting to energy traders, policy makers and Wall Street insiders. 

In this summary, you will learn

  • How Mexico protects itself from revenue losses due to fluctuating oil prices,
  • Why oil price hedges have been a lucrative source of revenue for Mexico and
  • Why no other oil-exporting state has followed Mexico’s model of locking in the price of oil.
 

Summary

The Mexican government, together with the state-owned energy company Petroleos Mexicanos, has been engaged in hardly-publicized oil hedges with prominent Wall Street banks since the 1990s. Although the deals involve large sums of money and high fees paid to banks, most energy industry experts and Wall Street insiders don’t know that these oil price hedges exist. In July 2008, when oil prices reached an all-time high of $147.27 a barrel, a group of Mexican government officials concluded that the prices – which emerging economies like China and Brazil fueled with demand – were unsustainable. Consequently, the Mexican government decided to lock in the price at which it could sell its oil in the future between $66.50 and $87 a barrel. Prominent Wall Street banks, including Goldman Sachs, Morgan Stanley and Barclays, were eager to be at the other end of the bargain, cashing in $1.5 billion in fees as part of the deal.  

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About the Author

Javier Blas is chief energy correspondent for Bloomberg News in London.


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