JR reborn as US regains status as energy giant

I wonder how many readers remember the legendary Hunt brothers.

Nelson Bunker and his younger brother, William Herbert, were the sons of bigamist oil-tycoon Haroldson Lafayette Hunt Jr, considered the inspiration for the unscrupulous oil baron JR Ewing in the hit 1980s TV series Dallas.

In the early 1970s, the radically conservative Hunts were one of the richest families in the US and, in an effort to protect their wealth against the ravages of inflation, began accumulating large quantities of precious metals.

At the time, private citizens were prohibited from holding gold so they turned their attention to silver.

US macroeconomic policy failed miserably during the 1970s.

President Lyndon Johnson's generous spending on social welfare (The Great Society) and the cost of the Vietnam War, followed by the wage and price controls, and abandonment of the dollar's link to gold, of his successor, Richard Nixon, ushered in an era of stagflation - of double-digit inflation, high unemployment and feeble economic growth. By late 1979 the consumer price index had shot up to 13%, the prime-lending rate to over 20%.

The Hunts speculated feverishly in the futures and metal exchanges and by 1979 had virtually cornered the silver market. It was estimated that the brothers held almost a third of the entire world supply, save official government reserves.

The silver price rocketed from $11 an ounce in September 1979 to nearly $50 in January 1980. Their actions caused bedlam in the manufacturing, photographic and jewellery industries. Renowned retail jeweller Tiffany condemned the brothers' behaviour as unconscionable.

The New York Mercantile and Commodities Exchange, responding to commerce's anguish, eased the pain by amending its leverage rules, requesting increased margins for trades in certain commodities, including silver.

The Hunt boys had borrowed excessively to fund their purchases and battled to obtain the additional capital needed to meet their obligations. As commodity prices began slipping, the pressure on their finances mounted. The silver price finally collapsed, losing 50% in four days from March 28 1980, an infamous day in market folklore dubbed Silver Thursday.

The bursting of the silver bubble extended beyond the commodity markets. Investors already suffering migraines from the Iranian hostage crisis, the Russian invasion of Afghanistan and soaring interest rates took flight and sold off the Dow.

The index tumbled 16% in a matter of days from 904 to 760.

The Hunts lost billions of dollars and jeopardised a number of the brokerage houses with which they had traded. They faced a barrage of lawsuits and fines that culminated in a lifetime ban from trading in commodity markets and eventually in their bankruptcy, though a sizeable share of their wealth was sheltered in family trusts. Their net worth, estimated at $5-billion in 1980 shrunk to $1-billion.

Ronald Reagan's election as president of the US and the appointment of Paul Volcker as governor of the Federal Reserve soon steadied financial markets.

By 1982 inflation had fallen back to 3.2% and stock markets were on the rise. The Hunts withdrew, chastened, from public life.

Until last week, when news emerged that they were once again climbing the ladder of the world's wealthiest .

In October, William Herbert Hunt sold a portion of his holdings in a North Dakota oil field for $1.45-billion, boosting his net worth to $4.2-billion. The assets peddled were in the Williston Basin, also referred to as Bakken, a geological formation covering North Dakota, part of South Dakota, and Montana.

Bakken is regarded as the biggest contiguous oilfield in the US and experts believe it will develop into the world's leading producer in the next 30 years. At present, the area yields more crude than Alaska but, with 50000 wells planned (currently 8000 are in operation) it is only a matter of time before its production surpasses that of Texas.

Until recently no one, apart from a few industry insiders, acknowledged the importance of Bakken and the many advantages it would give the US economy, including reinforcing the nation's re-emergence as a serious power in global energy. No wonder the US is being referred to as the next emerging market.

Hunt believes the oil industry has given Americans the gift of low-cost energy, enabling their country to recapture its competitive edge in the world economy.

Though the Hunts are crowing and getting rich again, twice-divorced wildcatter Harold Hamm (net worth $11.5-billion) the founder and chief executive of Oklahoma-based Continental Resources, is emerging as the region's leading light and Bakken's most likely answer to JR, though Joel and Ethan Coen's icy portrayal of Fargo in their 1996 thriller has thwarted any possibility of a successful TV series. Or has it?