Mark Williams, a professor at Boston University and senior advisor to Brattle, was featured in a recent Financial Times article that discusses a renewed interest in higher risk energy trading ten years after the collapse of Enron.
The article, “Speculators return in wake of Enron,” provides background into the energy trading landscape prior to the collapse of Enron. “There was a lot of trading for trading sake,” Mr. Williams says. “Utilities didn’t really understand what they were getting into. Enron was a high risk hedge fund disguised as a diversified energy company.” Mr. Williams explains that the trades that companies like Enron were making created no economic value and, as a result, undermined the credit worthiness of their larger parent companies. Once Enron’s deceptive accounting practices were revealed, investors fled the sector as they began to suspect the foundation that these subsidiaries had been built on.
The article argues that, in the wake of Enron, those who continued to trade energy focused mostly on lower risk physical assets and less on speculative trading. However, the recent surge in U.S. oil and gas production, as a result of the unlocking of hydrocarbons from shale rock, will lead to a growing need for energy trading globally, which will likely lead to a resurgence in speculative energy trading.
Mr. Williams is the author of Uncontrolled Risk about the collapse of Lehman Brothers. To read the article in its entirety, please visit the Financial Times’ website.
Published in Financial Times