CHAPTER 37

The Iranian Revolution shook the world when the Shah of Iran was deposed by the Ayatollah Khomeini. The Shah, who had deeply pro-Western sentiments, had passively allowed Iranian crude oil production to exceed five million barrels per day. Until then, Iran’s expanded production level had helped to prevent an increasingly thirsty world from experiencing any real shortages. The Ayatollah was convinced that the industrialized world, particularly the United States, had been bleeding Iran dry. He immediately reduced crude oil production in his country by four million barrels per day, which had immediate and dramatic results. World crude oil prices shot up to forty dollars per barrel. Some oil experts confidently predicted that the price of crude oil would soon rise to one hundred dollars per barrel. Refiners were suddenly starved of their usual supply, and horrendous gasoline shortages emerged. Gasoline prices rapidly followed crude oil prices and vehicles lined up for miles at gasoline stations around the world. Consumers had suddenly realized how vulnerable they were to their heavy dependence on oil, and were about to pay dearly for it.

While long line-ups proliferated at gasoline outlets in the United States, Canada was technically self-sufficient in oil. The Pierre Elliot Trudeau-led liberal government of Canada declared that its citizens should not have to pay the outrageous prices demanded by the OPEC countries. Instead, they decreed that Canadians would enjoy a “made-in-Canada price” for crude oil, which was set artificially at a level far below the official world price. Hence, while gasoline prices escalated in the United States, they stagnated in Canada. Suddenly, American motorists raced across border points to buy Canadian gas.

In contrast to Mike’s troubled personal life, his business was performing extremely well. The deal with Reserve Oil for thirty million gallons of spot gasoline was enormously profitable, exceeding his expectations by a wide margin. The debt incurred in the purchase of Tom Fletcher’s fifty percent interest in the holding company had been paid off, freeing Mike to search for opportunities to expand his business.

The fateful purchase of a gas bar on a large piece of land on the Queen Elizabeth Highway was his first expansion venture. He reasoned that the gasoline outlet, less than five hundred yards from the Peace Bridge and the international border, was ideally positioned to capitalize on the huge gasoline price differentials that had routinely developed from time to time on both sides of the border.

At the end of January, Mike received an urgent call from the manager of his new gasoline outlet in Fort Erie. “Mr. King, it’s Darryl Ross in Fort Erie,” the young manager said. “I’m sorry to bother you, but I—”

“Don’t worry about it, Darryl. Just tell me why you called.”

“Something weird is happening here. Someone should come down here and see this. It’s unbelievable.”

Mike’s curiosity was aroused. “What’s unbelievable?”

“They’re lined up all the way across the Peace Bridge to buy our gasoline. We can’t sell it fast enough! We’ll sell thirty million gallons this year if this keeps going!”

Mike’s initial reaction to Ross’s news was excitement. He began to calculate the profits accruing to XG as a result of such a fantastic volume of gasoline sales. His smile disappeared and he stopped calculating when it occurred to him that the reason for the huge increase was the world oil crisis. XG would soon experience a shortage, because all of its gasoline supplies were purchased in the United States.

Ross became impatient. “Mr. King, are you still there?”

“Yes. Sorry, Darryl. I was lost in thought. Listen, can you handle the volume? Do you need more staff?”

“It’s like a zoo here, but so far we’ve been able to handle it. The biggest problem is the cash. The floor safe fills up every two hours or so. I have to bring the armored car in here six or seven times a day to take it to the bank.”

“Keep up the good work, Darryl. And thanks for calling. From now on, I want you to call me at least twice a day. I’ll need to monitor your volume. Leave a message if you can’t reach me. I’ll get back to you.”

“I will.”

Mike hung up and immediately placed a call to Paul Conrad.

“How are you, Mike?” Conrad asked. “What can I do for you?”

“I’m feeling a little anxious these days, Paul. I’m looking for a security blanket.”

“You may have called the wrong person.”

“I want you to confirm that our gasoline supply contract is still valid, and that Golden National will honor it.”

“Mike, as long as I’m associated with this company, its commitments will be honored to the letter. You have a valid contract with Golden National and I can assure you it will be honored, even if I have to buy the gasoline on the spot market.

“Thanks, Paul. That’s exactly what I wanted to hear,” Mike said. That contract meant XG still had seventy million gallons of gasoline supply.

“I hope you understand that the price will be based on forty dollar crude,” Conrad warned.

“I expected that,” Mike said, dejected by the implications. “Thanks again, Paul. I’ll stay in touch.”

He quickly telephoned Bob Bushing to determine the extent of the damage. The gasoline spot market troubled him. In the current, squeaky-tight situation, it was unlikely Bob Bushing would have any supply… and if he did, who knew what the price would be?

“What’s happening, Mike?” Bushing asked.

“Let’s talk about gasoline,” Mike replied, anticipating the worst.

Bushing chuckled. “That’s a very interesting subject these days,” he said, reveling in Mike’s desperation.

“Price, Bob. I want to know what you’re going to charge me for the Reserve Oil gasoline,” Mike said, deliberately avoiding the crucial and sensitive subject of supply.

Bushing decided to make Mike sweat. He paused for a long time before responding. “I can’t possibly tell you what that price is going to be. I don’t know myself. In fact, I don’t even know if we can continue the supply. It was only a spot deal, you know.”

Mike’s heart was in his throat. “I do… How soon can you let me know?”

“I’ll get back to you in an hour.”

Now desperate, Mike called his old friend Doug McAllister. He hated to rely on the strength of their personal relationship, but hoped it might help him to pry some gasoline from Canam’s tanks. He was grateful that his supply was consistent from Golden National, but gasoline refined from forty dollar crude would be horrendously uncompetitive in Canada. XG would incur an enormous financial loss on the sale of Golden National gasoline through its Canadian outlets. Mike had to move quickly to replace the Golden National supply with Canadian gasoline. In addition, he worried about satisfying the voracious thirst of this new retail outlet in Fort Erie.

“Nice to hear from you again, Mike,” McAllister said. “How are you?”

“Just fine. I was—”

“I want you to know how proud I am of your achievements. I’ve been following your business career through mutual acquaintances. I wish we could have kept you with Canam.”

“Thanks, Doug. I appreciate the compliment,” Mike said, feeling even more embarrassed. “The reason I called was to see if there was any way you could help me to get some gasoline supply through Canam. My contracts are solid, but thirty percent of my supply is on a spot basis. I’m interested in firming that volume up under contract, if possible.”

McAllister chuckled. “I’m sure you would—you and the whole rest of the world. I’m not directly involved in that area of the business any more, but I’ll call Bill Harmon, our vice-president of marketing. He might be able to help you… How much product are you looking for?”

After a moment’s thought, Mike shot for the moon. “At least a hundred million gallons.”

There was a pause. “Wow! Is that only thirty percent of your total volume?”

“I’m padding it a bit,” Mike admitted.

“I’ll get Harmon to call you this morning.”

“Thanks, Doug. I really appreciate—”

“Don’t mention it. Good luck, Mike.”

Harmon called fifteen minutes later. “Mike, it’s Bill Harmon, of Canam Petroleums. Doug McAllister asked me to give you a call.”

“Thanks for calling so soon, Bill. Did Doug tell you what I’m looking for?”

“He sure did. It must be nice to have friends in high places.”

“Did I get lucky?”

“Let’s just say I’ve been encouraged to squeeze out twenty-five million for you.”

“That’s fantastic! I can’t tell you how much I appreciate that, Bill.”

“It won’t be necessary. I could have moved at least a hundred times that volume with one telephone call. The only appreciation I want is for you to keep this deal confidential. It would be messy and very embarrassing if the word got around.”

“No problem for me, but I don’t see how we can keep a lid on it. There are too many—”

“We’re setting it up to appear as an exchange deal. As far as our employees know, your company traded the twenty-five million with us in the U.S. Officially, the deal was made to eliminate transportation differentials. Do you have any problem sticking to that story?”

“No.”

“Good. You’ll be lifting in equal monthly volumes from our Oakville rack. You’ll pay us on the fifteenth and the thirtieth of each month. Whose trucks will we see at the rack?”

“Amerada Tank Lines.”

“Do you want us to send them the loading tickets?”

“Sure.”

“That’s it then. Any questions?”

“What’s the price?”

“I have no idea. I could give you a price today, but it would probably be higher tomorrow. It should make you happy to know it’s based on Canadian crude.”

“It’ll help,” Mike said, relieved but still very concerned. The twenty-five million from Canam was a start, but he was far from solving his supply crisis.

Meanwhile, Bob Bushing was on the telephone with Servito. “King wants me to keep on supplying him, and I really don’t want to do that. I need that gasoline. I can sell it to anybody and make a fucking fortune. The people down here want it bad, and they don’t give a damn what they pay for it.”

Servito was torn. His greed for money prodded him to sell the gasoline to the highest bidder, but his vindictive nature encouraged him to continue supplying King. He would have to compel Bushing to continue the gasoline supply to Mike King’s outlets if he wanted to see his vengeance come to life.

“Let’s let him sweat for a while… Don’t return his call until I tell you to.”