"Did you say we should buy crude oil futures again?"
[That's right.]
Unlike Seok-won, who answered calmly, Landon couldn't hide his confusion.
They had perfectly timed the market peak and sold off all their crude oil futures holdings, yet now—while international oil prices were plunging sharply—he was being told to buy futures again. It was only natural that he felt baffled.
Unable to understand what Seok-won was thinking, Landon forced himself to remain composed as he asked,
"Do you believe investors have panicked into an oversold situation, and you're trying to buy at a low price?"
[Something like that.]
Landon furrowed his brows and responded seriously.
"Considering that prices had been inflated with a war premium, even if they've fallen below pre-war levels, it would be more accurate to say they've returned to a fair value rather than become cheap."
[That could be the case.]
When Seok-won agreed so easily, Landon instead grew tense.
As expected, Seok-won soon uttered something incomprehensible again.
[If, contrary to expectations, oil supply turns out to be insufficient, wouldn't prices surge again?]
Landon's eyes widened as he asked back,
"What do you mean by that?"
Contrary to earlier concerns, the general market sentiment was that Iraqi oil fields had suffered little damage, meaning there would be no disruption in supply.
So when it was suddenly suggested that crude oil might become scarce, it was only natural to be taken aback.
[Unlike during the Gulf War, when Iraqi forces set fire to oil wells, that scenario has been avoided—but due to the war, all oil fields in Iraq have halted production.]
"Given that bombs are falling and bullets are flying, it's only natural that extracting crude oil would be difficult, isn't it?"
[That's true. But the problem is that crude oil isn't like tap water—you can't just turn the valve off when not in use and then turn it back on and expect it to gush out immediately.]
"...?"
[Oil fields are just like the blood vessels in our bodies. If the flow stops even briefly, the contents solidify and clog the vessels.]
The baffled expression on Landon's face gradually turned serious as he listened intently.
[Oil fields are the same—if you stop extracting crude and shut the valves, the oil quickly hardens and the field becomes unusable. Naturally, all the extraction pipes would also become useless, so to resume production, you'd have to reinstall the pipes from scratch.]
Hearing something he had never even considered, Landon unconsciously swallowed dryly.
[During the Gulf War in 1991, there was extensive damage from Iraqi forces setting fires, but the real reason it took as long as five years to restore Kuwait's oil fields was this. The crude had solidified, so all the extraction facilities had to be rebuilt from the ground up.]
"Then this time as well..."
[Fortunately, since the wells haven't been set on fire, the situation is better than during the Gulf War—but even so, it will still take a considerable amount of time before Iraqi oil production returns to normal.]
Landon nodded heavily and adjusted his grip on the receiver.
"Just as you said, supply may decrease—but before the war, OPEC announced a large-scale increase in production. Wouldn't that make up for at least some of the shortfall?"
OPEC, the Organization of the Petroleum Exporting Countries, was an international body formed by twelve major oil-producing nations, including Saudi Arabia, Iraq, Kuwait, Iran, and Libya.
Through OPEC meetings, member nations adjusted their crude oil output appropriately, controlling oil prices to suit their interests and showcasing their oil power.
[Of course, they did. But if my prediction is correct, OPEC will reverse its decision and declare not an increase in production, but rather a cut.]
"What? Instead of increasing oil production, they're going to reduce it?"
[That's right.]
Landon asked, as if he couldn't understand.
"Like you said earlier, if Iraq's oil fields are damaged and production can't proceed properly, shouldn't they carry out the announced production increase?"
[Why should they?]
"Well, that would be for the sake of stabilizing international oil prices..."
[OPEC isn't a charity—it's an organization that exists for the interests of oil-producing countries.]
At the sharp remark, Landon found himself at a loss for words.
[Do you really think OPEC decided on increasing production last time out of concern for instability in international oil prices?]
Landon fell silent for a moment before answering in a subdued voice.
"...There must have been pressure from the United States."
[You're exactly right. Otherwise, as oil prices rise, their profits increase just by sitting still—so why would they go through the trouble of boosting production only to suppress that?]
"That's true, but since Iraqi oil production will be difficult for the time being, wouldn't it be hard for OPEC to withdraw its decision to increase production?"
[That would be the rational conclusion, but what's the current price of oil right now?]
"Ah...."
Landon instinctively glanced at the monitor in front of him and let out an exclamation.
[WTI: 20.89]
In the meantime, it had fallen another ten cents, showing no sign of stopping its plunge.
[The market still doesn't realize that Iraqi oil supply won't be able to resume anytime soon.]
Seok-won's voice dropped heavily.
[On the other hand, with oil prices collapsing like this, it will serve as a perfect justification for OPEC to withdraw the production increase they were forced into.]
"I see."
Landon inwardly marveled at Seok-won's foresight, which seemed to see several moves ahead.
[The condition of Iraq's oil fields will only become clear once the war is completely over. So even if OPEC cancels the production increase, oil prices won't surge immediately.]
Landon nodded in agreement.
[On top of that, with economic indicators coming in poorly and growing concerns of a recession, expectations of reduced oil consumption could actually push prices lower instead.]
When the economy worsens, both production and consumption decline, so it was only natural for oil demand to decrease as well.
"Then even if oil prices rebound, the profits we can gain won't be that significant."
At Landon's slightly deflated remark, Seok-won replied with a light chuckle.
[What do you think would happen if an additional 2 million barrels of oil supply per day were to disappear from here?]
"What do you mean by that?"
[Do you happen to know that Nigeria is set to end its 20-year military dictatorship and hold a presidential election alongside general elections next April?]
"Ah, yes. I think I saw that in the news."
[While the prospect of democratic elections is something to be celebrated, the problem is that tensions between the ruling and opposition parties are escalating excessively ahead of the vote. In the process of gathering voter support, tribal and religious conflicts have intensified to the point of leading to bloody clashes.]
Landon, immediately grasping the implication, opened his mouth at once.
"Then even after the election, it's likely that the losing side won't accept the results easily."
[Given how deeply internal conflicts have escalated to the point that they can't be easily resolved, no matter which side takes power, it will be difficult to quell the unrest.]
In Africa, conflicts driven by competing interests, religion, and tribal divisions were not particularly unusual.
[The problem is that Nigeria is the world's sixth-largest oil producer, with an average daily output of 2 million barrels.]
Hearing this, Landon straightened his posture.
"If oil production in both Iraq and Nigeria comes to a halt at the same time, then supply would fall below demand—even with demand reduced by a recession."
[And if OPEC goes beyond merely withdrawing the production increase and instead announces a production cut that reduces existing output, oil prices will shoot through the ceiling.]
If Seok-won's prediction proved correct, they could once again make enormous profits from crude oil, and Landon felt his body stir with excitement.
But forcing himself to calm down and maintain his composure, he considered a potential obstacle to a surge in oil prices and asked cautiously,
"If oil prices skyrocket, it would hurt approval ratings—so wouldn't the White House step in, intervene in the Nigeria situation, or try to prevent OPEC from cutting production?"
[From President Bush's perspective, he would want to suppress any rise in oil prices, but it won't be easy. No—in fact, it would be more accurate to say he simply doesn't have the capacity to do so.]
Landon tilted his head slightly with the receiver pressed to his ear.
No matter how influential OPEC was, it couldn't afford to ignore the United States—the world's superpower.
After all, the recent announcement of increased production ahead of the war had clearly been made under pressure from the U.S., so there was no need to elaborate further.
However, Seok-won—who knew what the future held—thought differently.
[Everyone assumes that once Baghdad falls, the war will be over, but that's an overly optimistic view of the situation.]
"Are you saying the war won't end quickly and will instead drag on?"
[The war itself will end soon. But the real problem begins after that.]
As Landon struggled to grasp it right away and wore a puzzled expression, Seok-won continued.
[Iraq, though united under Islam, is divided into Sunni and Shia factions, and on top of that, there's the Kurdish issue—people who have long demanded independence. It's a place layered with complex conflicts, no less than those seen in African nations. Until now, a dictatorship has suppressed them by force, but once that restraint is lifted by this war, chaos will follow.]
"Hmm. That's certainly possible."
Landon replied with a serious expression.
[That's not all. Just like the terrorist attack that took place in Bali not long ago, if Islamist extremist groups begin carrying out attacks in various places under the banner of anti-Americanism, the United States won't be able to properly conclude the war. Instead, it will remain tied down, floundering in an endless war of attrition.]
In reality, the War on Terror that began in 2001 continued for as long as twenty years, until the humiliating withdrawal from Afghanistan in 2021.
'Even President Bush, who started the war, probably never imagined it would drag on this long.'
If he had known, he would never have set foot in Iraq.
[Contrary to the expectations of the U.S. government, if the situation in Iraq does not settle quickly and instability in the Middle East continues, then from the White House's perspective—having to rely on the cooperation of other Middle Eastern countries, including Saudi Arabia—it would no longer be able to strongly pressure OPEC to increase oil production.]
Landon pondered for a moment before soon nodding his head.
"Certainly, it seems far more likely that oil prices will bottom out and rise from here rather than fall further."
[That's why I'm telling you to take a long position again and sweep up crude oil futures.]
"Then how much should we bet?"
[Pour everything in—including the principal and the profits we made this time.]
"Should we use five times leverage again?"
It was a situation where victory seemed almost certain, so part of him wanted to use even higher leverage.
However, just as the war had begun earlier than expected due to the butterfly effect, there was no telling what variables might arise along the way, so he decided not to get greedy.
[Do that.]
"Understood. I'll consult with Andrew and move immediately."
[There could be variables along the way, so focus on sweeping up futures with longer maturities.]
"Will do."
Landon curled one corner of his lips into a grin.
"I'm already looking forward to seeing the looks on their faces when oil prices surge again just as we expect after we've swept up the futures."