Will the Oil Bubble Burst?

Eleven years ago, after doing a lot of studying and a lot of thinking, Richard Rainwater convinced himself that the long decline in oil prices that had begun in the early 1980s was about to end. As a billionaire who had made his name and fortune steering the Texas oil riches of Fort Worth’s Bass family into lucrative nonenergy investments like Disney stock, Rainwater had the wherewithal to act on his conviction. So he plunked down about $300 million of his own money on energy-company stocks and oil and gas futures.

For a while it looked like a boneheaded move. At the end of 1998, the price of oil fell below $10 per bbl. Regular gas sold for 90


You can guess the rest of the story. The dotcoms imploded; the price of oil climbed, climbed and climbed some more–and Rainwater’s energy bet came to look like one of the better investment calls of our time. It has netted him about $2 billion, vaulting him from the mid-200s on Forbes magazine’s 1999 list of the 400 richest Americans to No. 91 last summer (with $3.5 billion overall).

So guess what Rainwater did a few weeks ago, right after oil prices topped $129 per bbl. for the first time? “I sold my Chevron,” he says. “I sold my ConocoPhillips. I sold my Statoil. I sold my ENSCO. I sold my Pioneer Natural Resources. I sold everything.”

This news, disclosed here for the first time, is a big deal. Lots of Wall Streeters–loudest among them the hedge-fund legend George Soros–have been warning lately that speculation has inflated oil prices into a soon-to-pop bubble. But talk is cheap–this is something more. One of the biggest oil winners of the past decade has decided to get out.

Time