The NYMEX: Where the inmates run The Asylum

October 21, 2011, 9:14 PM UTC

Our Weekly Read column features Fortune staffers’ and contributors’ takes on recently published books about the business world and beyond. We’ve invited the entire Fortune family — from our writers and editors to our photo editors and designers — to weigh in on books of their choosing based on their individual tastes or curiosities. In this installment, writer Katie Benner reviews The Asylum: The Renegades Who Hijacked the World’s Oil Market, Leah McGrath Goodman’s wilder-than-fiction account of what happens at the NYMEX.

FORTUNE — Most people have only a passing familiarity with the New York Mercantile Exchange, or as it’s more commonly referred to, the NYMEX. The place had its 15 minutes of fame thanks to the 1983 comedy Trading Places — about a commodities broker and a petty criminal who scheme to corner the orange juice market — which filmed some scenes on the NYMEX trading floor.

But the true story of the NYMEX is twice as crazy and outlandish as any plot that Hollywood could concoct. Leah McGrath Goodman’s book, The Asylum: The Renegades Who Hijacked the World’s Oil Market, is an inside look at how an underdog crew of uneducated, street-smart New York traders brawled and yelled, drank and drugged their way to control the world’s oil markets.

The NYMEX had humble beginnings. Originally a place where buyers and sellers haggled over the price of potato harvests, it was shut down by a scandal and revived by a determined and lucky chairman named Michel Marks. He decided that the exchange would trade heating oil futures, a contract that no one wanted to touch until the oil crisis of the 1970s and the Texas crude boom of the 1980s. With the whole world suddenly interested in placing bets on the future price of energy, a powerful Wall Street force was born. Against the odds, the NYMEX became an all-powerful juggernaut that had more power over the price of oil than Exxon (XOM), OPEC or any of the world’s governments.

As Goodman tells it, the NYMEX attracted tough guys who treated their jobs like better-paying versions of a corner scam. A typical day might include fistfights, narcotics, and prostitutes. Traders boozed their way through the morning, and everyone got rich despite themselves. Appropriately, the denizens named the exchange, “The Asylum.”

Goodman’s detailed story captures the rogues and thugs who, it can be concluded, effectively controlled the price of crude for decades. At times her narrative gets bogged down in detail, and sometimes she has a hard time explaining complicated concepts in language that a non-trader could understand. While The Asylum won’t be the layman’s choice for an understanding of commodities trading, readers familiar with the markets will enjoy Goodman’s inside look at the how a certain sort of sweaty men’s club rose to power — and how greed, Machiavellian machinations, and the rise of electronic trading pulled the Asylum from its lofty heights.

And with global catastrophes roiling oil markets nearly every day, Goodman shows why these disasters will always be money-making opportunities for a small club of traders who have long used (and abused) such events to control the price of the commodity that fuels the world.