Phil Flynn first walked onto the floor of the Chicago Board of Trade in the late 1970s to take a summer job as a runner. In the three decades since, he’s become a well-known energy commodities trader, often on the leading-edge of what’s happening with crude oil, gasoline, and natural gas. He recently spoke with reporter Erin Ailworth in Chicago about energy prices, the growing importance of natural gas, and how the financial crisis changed energy trading.
How will President Obama’s reelection affect the energy market?
I think Obama is very bullish for commodities in general. If Mitt Romney became president, then we would have seen the end of Ben Bernanke and possibly the end of [stimulus measures known as] quantitative easing. Quantitative easing, of course, has been one of the more bullish factors in prices.
You’d like to see more gas drilling. Why?
I call it the president’s secret weapon because this [hydraulic fracturing] revolution is going to give the ability to the US to be energy independent. It has the possibility of creating millions upon millions of jobs for the next 10 to 30 years.
What is going to drive us in this next decade? What is going to create good, high-paying jobs? Really fracking and natural gas have been an answer to our prayers, so hopefully we’re going to embrace it and move in that direction.
Many environmentalist worry, though, that clean energy technologies, like wind and solar, can’t compete with the low price of gas.
If they can’t compete, maybe they shouldn’t. Fracking and new production have made a lot of these other technologies obsolete. You can throw billions of dollars at some of these technologies and they’ll never be able to compete, unless you’re going to subsidize them for the next 50 to 100 years. We’ve got over 100 years of [natural gas] supply, maybe more.
So where do you see the energy market moving in 2013?
The technology being what it is, is going to force the Obama administration to move toward this fracking revolution because it makes too much sense. He’s talking about creating the jobs of the next century in wind and solar. The jobs of the century are here right now. It’s called fracking. It’s called building pipelines.
How did you get into energy markets?
It probably goes back to the first Persian Gulf War. We had the big spike [in crude oil prices] — up to $40 for the first time — and [I] really felt the fear of war for the first time in my life, of how it impacted trading.
Then you get into the ‘90s where everybody forgot about oil. Everybody was like “Oil is flat. Who cares about oil? We’re so much more efficient, we don’t need oil.” I started to realize that oil was probably going to break out. I said oil was going to go back up to $40 at least, if not higher. I was bullish because I realized the potential of China and India.
You’ve characterized the recent financial crisis a turning point for the energy world. Why?
Prior to the financial crisis in 2007, if you go back and do a rough average of what oil was doing per year — based on supply and demand — we were adding roughly $10 a year.
When we started to get the subprime [mortgage] crisis in late 2007, all of a sudden oil prices started to take off like crazy. We were putting on $10 in a couple of weeks. We went from $80 to $90 to $100 to $140. The market was not reacting to supply and demand. They were reacting to the greatest financial crisis of modern times.
Are we still reacting to the financial crisis?
Absolutely, to a large measure. In this era of quantitative easing and money printing, that has been one of the major factors supporting energy prices.
How has trading changed through the years?
It’s a far cry from what it used to be. It was so dependent [on people]. On the trading floor, you were going with the tone. “Hey, roaaar! It’s a bull market, buy me something!” Or “Boo! It’s a bear market, get me the heck out!” There were people who would trade on sounds. They could tell by listening to the roar in the background whether it was a bullish report. You don’t get that on a computer.