"If there was nothing to be worried about, then there would be no (oil) price increases."

Let's visit the wayback machine...(cue Wayne's World-ish "diddly-doop, diddly-doop" sound and the screen wobbles into a flashback...)

HO's "Not if, but when on $80 oil" (and that's without a hurricane, eh?)
JDH's "$100 a barrel--what are the odds?"
Boone Pickens' Oil at $75 by the end of 2005.
John Robb's "$100 Oil?" (if you haven't read JR's front page lately, do so.)
Ali Bakhtiari's prediction of >$50/bbl at ASPO over three years ago. (my favorite quote from this one: "If there was nothing to be worried about, then there would be no price increases," explains Bakhtiari.)
Goldman's super-spike (courtesy of our friends at Energy Bulletin).
Matt Simmons calling the true value of oil at $182/bbl or that oil could be $100 in six months (ok, so he was a little off on that one).

Anyone else have any nominations for the wayback machine? Link and discuss some of the other valuations/price predictions out there.

How bout Michael Lynch's prediction that oil would be at $25 back in 2004? I can't find the original article.
yeah, was efforting that, as well as Steve Forbes' "calls" as well.  What'd he say, $35/bbl right?
that was what he said publicly to us peasents. In his subscription newsletter he said it would go much higher.
I recall that Captain Capitalism (aka Steve Forbes) at least twice predicted that we would soon drop to $35/bbl.

Funny thing how history gets eraser-ized off the internet ... as if it never happened. Here is post from 10/20/2005 attributing the $35 price to Captain Capitalism.

Some more Forbes $35 predictions here (8/31/05) and here

Oh, I forgot to mention that Captain Capitalism's predictions were vouched for by the Rocket Rush Limb-propper here

"You cannot go against supply and demand. You cannot go against the fundamentals forever,'" and he's talking about the bidding up of the price of oil on the futures market which has nothing to do with supply and demand. There is some tremendous panic bidding going on at the NYMEX, which is the futures market, and it's bidding this stuff up well beyond 70 bucks, but it's going to come down -- and people are not going to believe it when it happens. They're going to be stunned. "
There is never a shortage of pundits for telling us that the strong arm tacticts of the invisible appendage will bring about a "correction" real soon, just around the corner

Here is a recent take on things by Larry Kudlow (6/27/06)

One of the CEOs [I interviewed] even predicted the possibility of $40 to $50 oil in the next 6 to 12 months. ... The economic principles at work here are very simple: Markets work. Supply and demand works. Higher prices are gradually slowing consumption. At the same time, those high prices continue to stimulate ... new oil-and-gas exploration and drilling.
   ... A combination of market forces and government deregulation could be setting us up for a big crack [downward] in energy prices, including gas at the pump. And it may happen sooner rather than later.
Yeah - meanwhile his comapny was sending out solicititations for his newsletters talking about oil prices going to the moon. If you talk out of both sides of your mouth - one thing you say will always be true.
Here you can see the video (broadband size) of Lynch saying prices should be below $30 by the time of the 2005 SPE conference "because all the factors driving the price of oil up at this time are short-term." Oil had just got to $50. This was from the Q&A section of the 2004 SPE conference. Simmons gives a great response.

The rest of the videos can be found here.

Bjorn Lomborg author of 'The Skeptical Environmentalist' 2001 was hailed by Time Magazine as one of the world's most influential thinkers. Lomborg predicted the oil price would fall below $27 by 2004.

The price plummeters on the Four Corners program were Claude Mandil of IEA, a Mr Caruso of DoE and Australia's chief official resource economist Dr Brian Fisher.

Is this nasty? OTOH we're just everyday Joes here, not paid 'experts' who steer government policy.

The "Skeptical Economist" also states that oil will be in the twenties thru 2020. He supports this view by lots of graphs.
If you read the footnotes, it appears that Lomborg uses the traditional sources for data: EIA, USGS, and OPEC. Footnote #881 questions the OPEC data. Footnote #885 cites Hubbert and Campbell. It appears that Lomborg wasn't "skeptical" enough to promote these "out of the mainstream" sources.
Lomborg is a proven liar.
So are you.
This TOD thread on Michael Economides has a few predictions from regular posters on August 26, 2005. Halfin wisely suggested: "There's a saying among investment advisors: you give either a price target, or a time target, but never both."

And if you're going to predict prices, or the date of the peak, it's only smart to state a broad range of possibilities.

It's interesting to watch TOD lately: lots of traffic and posting, but pretty calm about the price situation. We seem to have built price escalations into our expectations.

We'll let you know how good your prediction was when we get to the "end of 2006". It could be that you misunderestimated the effects of above-ground geo-environment storms combined with geo-political storms.

You know this shit is good, baby. I'm about to release my update - moving out to July 2007. Don't need to change anything, cuz I'm right on target. Westexas and Freddy got nuttin' on me. Yeah baby. I'm gonna eatcha! Get in my belly! And I never toot my own horn - Except for now. Something those guys can't say. See you in December. Until then stay tuned to Lynch's indecipherable bullshit on Bloomberg. Live from Winchester!
Oh, missed that. as an addendum - No Caveats. Price is price. Frame is frame. Comet hits the earth - that would suck for my prediction. I would never use that as an excuse, however. Almost everybody else seems to rely on excuses. Except for the Saudis. They are always honest.

That was a joke. I mean... they could be honest. How the hell would I know?

Reminds me: Question for Westexas: Where did this "always been saying"...""crisis in exports"..."this year" come from? Can you source that? I probably missed it. I totally give you the benefit of the doubt. I'm not saying you didn't say it. I just don't recall. That's all.

The saudis could be honest - if it turned out that their reserves never lessened, no matter how much they pumped.
Following are excerpts from my 1/27/06 post.  Public statements by the Russian government (in advance of their IPO) assert rising production, but the latest EIA data show falling crude + condensate production for Saudi Arabia, Russia and Norway.  I mostly used Khebab's excellent HL work.  (Note that PG toned down my concluding statement slightly.)

Hubbert Linearization Analysis of the Top Three Net Oil Exporters
January 27, 2006 at 2:47 PM EST


Let's assume that we have a world where all oil production is from one country--Export Land--that produces 20 mbpd, consumes 10 mbpd, and exports 10 mbpd to oil consuming countries around the world.

Export Land hits the 50% of Qt (URR) point, and over a five year period production drops by 25%.   Over the same time period, Export Land's consumption increases by 20% to 12 mbpd.  This causes Export Land's net exports over the five year period to fall from 10 mbpd to 3 mbpd, a decrease of 70%--resulting from a combination of increasing domestic consumption in Export Land and a 25% drop in production.

I believe that Saudi Arabia is on the verge of a long term decline in production.   Texas, the former swing producer, with a similar P/Q intercept, showed a 29% drop in production over a 10 year period after its 1972 peak.

Russia peaked at a broad plateau around 53% of Qt, and production is down about 25% from its peak.   Although production has been increasing recently, in all likelihood this was just compensation for the dramatic drop in the Nineties, which was probably due to both natural depletion and political problems after the Soviet Union collapsed.  If this assessment is correct, Russia is on verge of a dramatic collapse in production, almost certainly in the double digit percentage per year range.

Norway peaked at 55% of Qt, and has been following the predicted downward slope exactly as predicted.

As predicted by Hubbert Linearization, two of the three top net oil exporters are producing below their peak production level.   The third country, Saudi Arabia, is probably on the verge of a permanent and irreversible decline.   Both Russia and Saudi Arabia are probably going to show significant increases in consumption going forward.  It would seem from this case that these factors could interact this year produce to an unprecedented--and probably permanent--net oil export crisis.

IMO, we have two factors pushing oil prices higher--the start of another cycle of bidding for declining net world oil exports and a true geopolitical crisis.

Following is a link to Khebab's US import/price graph:

The dots are the unsmoothed import numbers.  The blue line is smoothed.  The green line is the oil price.

Note that the decline in imports that started in late 2005 corresponded to increasing oil prices.   Also, note that we see the begining of the same pattern in late June and early July.  I suspect that this is the pattern that we are going to see for years, and probably decades to come.  We "won" the first bidding cycle, but subsequent bidding cycles may  have different outcomes.  This situation may be aggravated because other importers may have better "stuff" to offer exporters than we do (see my post on Drumbeat).

To Oil CEO,  
Westexas has been consistant on this matter from the start of my reading TOD (1 yr =/-).  I find what he says is the kind of thing that you want to cover your eyes because you don't want to see while peering between your fingers because you can't not look.
Consistant - concise - and easy to understand (and a bit frightening if you sit back and look at the unfolding possibilities).

Westexas is one that I always read - I don't like what he says(because it isn't rose colored) but that isn't the point.
If you are new to TOD book mark this guy and listen very carefully.

Completely agree, Westexas' analyses are always spot-on.

Antoinetta III

Thanks for the kind words.  Surviving for 26 years in the Oil Patch has taught me that you can't fight market forces, and that sometimes bad stuff happens.  In 1986, we went from living in a lavishly remodeled turn of the century Victorian home, with a Mercedes parked out front, (thinking the good times would never end) to living in a small apartment driving an old beat-up pickup.  (It's amazing what happens when about 80% of the net cash flow in an industry disappears basically overnight.)  I've lived through deflationary times--it ain't fun.   Which is why I always recommend downsizing now.
Hello TODers,

To me, the most mind-blowing event in energy history must of been when M. King Hubbert presented his thesis to his petro-geology peers for the first time.  Man alive, too bad there is no video....err, film of that moment.

Makes one wonder how long it took for his idea to percolate up to the Pentagon and CIA for perusal...hours? early '70s when lower US 48 depletion was first confirmed?  We already know that Pres. Carter knew what was going on from his 'Sweater Speech' in '78.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

Pres WJ Clinton admitted to PO here (6/17/06)

I read elsewhere recently though, that Clinton says he was not warned about PO while in the White House.

7 million hits for peak oil.  Only 600 for population overshoot.

Well, I don't do economic predictions, but I still bet population overshoot kills us before peak oil.

So I guess I'm optimistic about PO.

Actually, I was looking for something like this: JoePlamer on Clinton at Aspen

"To the best of my knowledge I never had a security briefing which said what some of these very serious but conservative petroleum geologists [like Deffeys] say ... that we'll reach peak oil production globally ... This needs much more serious debate. It's almost not discussed at all in the mainstream media."

Now, I know that Clinton mis-truthifies about that Devil in the Blue Dress incident. But perhaps he is telling the wiggly truth about this one ... that he was never warned. Do you believe him? What does that say about our intelligence apparatus? A tsunami as big as PO is heading their way, publicly since 1956 and they don't warn the President?

Of course, population overshoot is what makes peak oil a problem in the first place. If earth had only 500 million to a billion people right now PO would not be close to imminent as we would not have been pumping or consuming anywhere near the amount we presently are.
Hi Bob. What I find most amazing is that there is anyone in the upstream end of the oil business who does not believe in peak oil. Everyone with more a couple of years experience has plenty of first hand knowledge of reservoir depletion. As soon as there have been enough holes punched [or reliable seismic produced] to identify most or all the elephants the question clearly becomes "when?" It would be interesting to see the statistics on the number and scale of the elephants that had already been discovered by the time MKH made his projection.

BTW, for the individual poor boy independent operating onshore in the lower 48, it isn't the peak, it's the prospect of simply finding a nice play has been overlooked. I supect that this motivation will result in more oil being produced in a fat tail sort of way than the models seem to predict. Note that if this holds true, it does not impact the peak, but does impact the duration and severity of the decline. This sort of optomism also doesn't do much for high cost and offshore plays as optomists go broke fast in those environments.

Hello R W Reactionary,

Ohh, I think they all believe in Peakoil, they just can't admit it for all kinds of reasons.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?


So you mean there are times/situatiions in life when optimism IS NOT a good thing?  



Yup. However, when betting "on the come out roll" in an expanding economy the best approach on average is to be a wee bit overly optomistic. I have read studies [sorry no cite] that indicate that truly realistic views of economic prospects have resulted in substandard investment returns. A good illustration is the stock market where most of the time the market has gone up and taken most stocks [including most of the hopeless ones] along for the ride.

If the tide is going out in an economic sense. the reverse will be true for as long as the trend holds.

The not so hypothetical poor boy independent will probably have increasing prices to vastly improve the economics of an investment that was probably predicated on the stream of earnings resulting from an stable oil price.

Is this a form of irrational exuberence?

A guy called Danny Hannan predicted a price range of $56 to $95 for 2006 in a March 2005 article posted on the Sustainable Population Australia website, Minimum Future Oil Price Estimates to 2010.

In the introduction he writes;

...my past estimates of price/timing points for the price of oil have been realised two to five years earlier than expected. This indicates that the situation of world demand exceeding the world supply capacity is happening two to five years earlier and more quickly than my 2001 estimates (Hannan 2001 ). In analysis of the 1998 to 2005 West Texas Intermediate (WTI) crude spot prices it has become apparent that the energy paradigm shift took place in 2001-2002, oil changed from supply surplus before 2001 to supply challenged after. The next paradigm shift is to supply deficit.

Predictions of prices are always at the very best educated wild guesses. That goes for the 25 $ I saw Lomborg predict as well as for the correct prices. We should keep that in mind, I'd say.

By the way, rather than check the news on the bombing of Beirout I watched Apocalyps Now (Redux) yesterday evening. Never felt this movie so intens as this time.

Redux only has the French-Montaignards-Opium-Smoking--Fantasy and the Playbay-Bunny-Copter-Crashlanded-F--scenes added. (Yeah - I didn't know how to pass that through the sensors, just guess, but make it dirty).

Robert Duvall is still worth the price of admission. "Someday this war is gonna end."

Have you seen The Quiet American?

Graham Greene novel. Recommend reading that first.

I always like Harrison Ford's role at the beginning of Apocalypse Now.

Great flicks!

Let's get together and have sailing and DVD parties.

"Predictions of prices are always at the very best educated wild guesses. That goes for the 25 $ I saw Lomborg predict as well as for the correct prices. We should keep that in mind, I'd say."

Very well said.  I personally get more than a little ticked off when there are dozens of predictions pointing in different directions, and then the authors of the few guesses that came close (through dumb luck) claim to be experts.

This is why I keep harping here and especially over on my own site about the danger of making faux precise predictions.  Just this morning on CNN radio news I heard someone talking about how if Iran blocked Hormuz and [something else big and scary that I can't remember] happened, oil could reach $90.  Holy cow--do the people making such statements have even a hint about how ridiculous these predictions are?

It struck me (after reading Fooled by Randomness) that in a room full of economics experts, it must be the dumbest ones who go on tv.  The smart ones aren't going to name a price, and so they are "selected out" of the tv pool.
Yep.  As with a lot of professions, the loons get all the attention.

I remember very clearly standing in the hallway in graduate school talking with my macro prof., a brilliant man and first-rate teacher.  It was 1980, and he looked at me and several of his other students, and said, "Reagan says he can cut taxes, increase defense spending, and balance the budget.  Anyone here believe that?"  We all said some variation of "no", and our prof. said "Good".

Yergin comments to price situation....


"""Oil has become a proxy for geopolitics right now," said Daniel Yergin, who heads Cambridge Energy Research Associates.

Yergin said petroleum supply-demand fundamentals are improving, with global oil inventories and spare-production capacity rising, but clearly not enough to offset the unrest

Who was damn good lookin' top journalist-to-the-stars who wrote the (slightly over excitable ) Bakhtiari and ASPO 2004 articles? And who broke the full Superspike report!?
<shines fingernails> ;)

Anyone at TOD wanna get involved with Oilcast.com by the way?

Anyways, keep up the good work TOD, you're v good.

Adam, is oilcast.com back again?  I don't think I have heard it since last year.
I'm afraid Oilcast hasnt happened this year simply due to work pressures. I have a full time job (at www.energyintel.com - i'm just the junior ;)! ) and i dont have time to do it.
I wanted to set it up so it could at least pay for itself in some way but after looking around a lot and going into long discussions with three parties, one or two things ended up getting in the way. It's a  bit of shame but you never know...


I'm very interested in Oilcast.  Pls. check your gmail account.
Re: Anyone at TOD wanna get involved with Oilcast.com by the way?

I might. Click on "Dave" (right under personnnel) for contact information.

Daniel Yergin says we are "improving" supply and demand balnce!

Sure we're "improving"! We're "improving" our way to the 100$ dolar barrel! How much denial can you take?

Congratulations to you Adam Porter at Oil Cast, for your great work.

What about these predictions...





By the way, did anyone see Yergin and Deffeyes on CNN last night?  Deffeyes seriously sounded like a kook.  Yergin wasn't much better though...such a shill for the oil industry.

In Deffeyes original book, I believe that he put the peak between 2004 and 2008.  Based on the production decline in 2001 and 2002, he did later assert that the world probably peaked in 2000.  

In his second book, he put the world peak in late 2005, based on the HL method.  As Khebab and I demonstrated, the HL method, using only Lower 48 oil production through 1970, accurately predicted 99% of the post-1970 Lower 48 cumulative oil production.  

Since December, world crude + condensate production, according to the EIA, is down 1% to date.  

In summary, it seems to me that when Deffeyes started using the HL method, he got it right.  

However, what continues to baffle me are the people predicting rising oil production when the top four producing fields in the world are all past their peak production, and the top two are probably facing catastrophic declines.

I saw Yergin with the Red Hen on Squawk Box (CNBC) this morning and was surprised to see her rehabilitate Yergin on Yergin Day plus 1. She said something like "As you correctly predicted last April, oil prices are now nearing $80 ...". What? Is this the same Daniel Yergin of CERA who said $38 last year or is there a body double double speaker out there?

The best I could find at the moment was this from that time frame: Yergin 2/27/2006

He does not predict anything specific about prices. All he says is the usual Smithian pablum:

Despite the current pessimism, higher oil prices will do what higher prices usually do: fuel growth in new supplies by significantly increasing investment and by turning marginal opportunities into commercial prospects (as well as, of course, moderating demand and stimulating the development of alternatives).

Then there is this exchange with Tim Russert
He ducks the question, never makes a price prediction:

MR. RUSSERT: And we're back. Daniel Yergin, let me quote again from you.  "Every president who has problems with energy learns that there is not a lot you can do in the short term. The system is overstressed ... and the truth is most of the solutions are medium-term or long-term. What counts in the short-term is demand, he said, noting that prices retreated when consumption dropped amid the price surge that followed last year's hurricanes. For immediate effects, Yergin said, it's really not what the administration does - what really matters is what consumers do."

DR. YERGIN: Well, first thing, of course, it's very painful for an awful lot of people, but they respond, they change how they drive, who they drive with, they switch to mass transit, and lo and behold, you start to see the demand coming down, and that takes some of the pressure off price. And we're in a situation as we look to the summer is if we don't have anymore disruptions, if we don't have problems with Iran get out of hand, we could actually see gasoline prices lower. But there's a lot of risk in the market, so you asked a very good question about "What happens if the prices go higher?"

MR. RUSSERT: Tom Friedman suggests and hopes that oil will go to $100 a barrel, because he thinks only then...

DR. YERGIN: He's not running for office is he?

MR. RUSSERT: But he thinks only then will American consumers and political leadership and, and industry leadership get the message and say, "You know what? We have to do something different. We have to get off oil and change our behavior and change our habits."

DR. YERGIN: Well, it seems to me that we're already seeing that change. I think there's an embrace of conservation efficiency across the board in a way that there hasn't been for a number of years. And certainly the movement towards renewables, alternative, diversifying the gasoline pool, I think we are at a turning point as it is now.

MR. RUSSERT: Let me go back to the State of the Union Address, this is President Bush, January 31, 2006. Let's watch.

(Videotape, January 31, 2006):

So how does Red Hen justify saying that Double-speak Yergin correctly predicted $80?

See any of Jeffrey's (westexas) Iron Triangle posts. That's why Red Hen can attribute foresight to Yergin that doesn't exist.

In this case, the media and the chosen analysts prop up each other's lies.

I think all of us here at TOD try our best to stick to the facts, be critical of our own analyses, present the best theory & data we have on hand, etc. For example, when will the media notice that Mexico's oil production is down the drain? After the fact. And what will Dan say then? I can just imagine it now...

Dateline: July 2008

RedHen: Dr. Yergin, last December you correctly predicted the current price would be in the vicinity of $147/barrel. Today's close was $138.43. The US no longer imports any oil from Mexico. What's going on?

Yergin: Higher prices will do what they always do, dampen our demand and increase our supply. The market fundamentals are improving despite some geopolitical tensions fueling the current upswing. But the oil & gas business has long lead times so it may be a while before these new projects come on-stream. This is a painful time for many but consumers are making adjustments, at least on the demand side.

Thank you. And now we turn to President Frist for his latest take on oil prices...

Very funny, and--sadly enough--accurate.
President Frist? My worst nightmare come true. Oh me gosh.

I suppose this will mean that Terri Shiavo will be exhumed (even if it's from ashes, don't remember if she was cremated) and resurrected by Presidential proclamation.

I just love it when the fundamentalists talk market fundementals talk.

I often hear it as 3 words: "fund the mentals".

I hear it as  Fun "duh" mentals.  I picture that really cute girl in clueless at the same time :-))  
Hello TODers,

If the ME is not sad enough, we also cannot take our eyes off of Mexico either:

Mexico's Tiger Stirs

Porfirio Díaz, Mexico's dictator from 1876 to 1910, always feared a popular revolution. "We must not awaken the tiger," Díaz famously declared. The revolution that erupted in 1910 cost more than a million lives. Mexican intellectuals have recently warned that the tiger is stirring once again in the wake of the country's contested July 2 presidential election, the initial results of which granted a razor-thin victory to Felipe Calderón of the conservative National Action Party (PAN).

What does that one million in 1910 extrapolate to today's Mexico-- 5 million or more?  Our 1860s Civil War would look like a friendly neighborhood block party compared to the carnage that could erupt down south.  All AMLO has to do is tell the poor that they will never get a chance for a decent life because Cantarell is tanking!

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

some more:

Marketwatch 8/24/2005: Deutsche Bank -Oil will average $54 in 2006.

Marketwatch 8/20/2005 - Ned Riley - "Dump Energy" Sell rating on XLE weak hold(broker babble - really means sell) on HAL. Oil too high at $60.

Yahoo news 4/4/2005 - Tim Evans is (was) the best - haven't heard too much from him lately. Oil will plummet to $28.00 by summer 2005. BTW - you can buy his all knowing newsletter for $395/month - wow were do I sign up?

Tim Evans is occasionally on ROBTv.  I think they like him because he's been wrong for so long and will never admit it.

His latest appearance was on Wed Jul 12 in a televised debate with Phil Flynn of Alaron Trading.  Needless to say Tim took the bear side.  Go to: http://robtv.com/shows/past_archive.tv?day=wed, click on the Wed tab (if not already on it) and scroll down to the 2:15 time slot.  9 min clip.  Access will disappear by next Tues evening.  Enjoy.

Did not heed your warning about going to the Wed tab

But yes, an interesting bout

Evans promising that production will exceed demand at least through 2011 ... the "fundamentals" at play as always

I just tested the link I posted above and it didn't take me to the page it should.  If that happens to you, then click "Watch Past Videos" at either the top or bottom of the page that the it does take you to.  Then follow previous instructions above.
As always, I find Econbrowser's comments interesting and I am gratified to see that he no longer scoffs at the prospect of $100/bbl. oil. And while he has begun to use the obligatory tools of options analysis in such posts he still has not caught on to how option and futures traders really operate.

JDH talks about aspiring capitalists who want to make money taking the other side of the bet. It doesn't usually work that way. Yes the guy (or gal) who sells the call option you buy, certainly intends to make money. However, in most cases professional option traders try to lock in a profit which may look modest in dollars but will hopefully give them a large return on equity no matter which way the market moves.

This is called "delta neutral" trading. The idea is, you may be short x number of August 80 crude calls, long y 75s, and long or short z futures contracts. You may adjust your position from time to time when price movement begins to move your "delta" -- the change in position value with respect to change in the value of the underlying crude oil position -- away from zero.

Rarely do professional option traders take directional bets. Rather they function almost like bookmakers and try to manage the spread.

"If grandmother had a beard, then she would be grandather."