"If there was nothing to be worried about, then there would be no (oil) price increases."
Posted by Prof. Goose on July 14, 2006 - 1:03am
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.
"If there was nothing to be worried about, then there would be no (oil) price increases."
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"If there was nothing to be worried about, then there would be no (oil) price increases."
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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
Here is a recent take on things by Larry Kudlow (6/27/06)
The rest of the videos can be found here.
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.
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.
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.
http://www.theoildrum.com/story/2006/1/27/14471/5832
Hubbert Linearization Analysis of the Top Three Net Oil Exporters
January 27, 2006 at 2:47 PM EST
Excerpts:
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.
Following is a link to Khebab's US import/price graph:
http://static.flickr.com/59/188504272_05827f277a.jpg
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).
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.
Antoinetta III
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?
I read elsewhere recently though, that Clinton says he was not warned about PO while in the White House.
http://www.google.com/search?q=%22peak+oil%22
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.
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?
http://www.energybulletin.net/18138.html
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.
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?
Best,
Matt
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?
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.
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.
Let's get together and have sailing and DVD parties.
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 $90. Holy cow--do the people making such statements have even a hint about how ridiculous these predictions are?
I remember very clearly standing in the hallway in graduate school talking with my macro prof., a brilliant man and first-rate teacher. It was 1980, and he looked at me and several of his other students, and said, "Reagan says he can cut taxes, increase defense spending, and balance the budget. Anyone here believe that?" We all said some variation of "no", and our prof. said "Good".
http://seattletimes.nwsource.com/html/businesstechnology/2003125869_oil14.html
"""Oil has become a proxy for geopolitics right now," said Daniel Yergin, who heads Cambridge Energy Research Associates.
Yergin said petroleum supply-demand fundamentals are improving, with global oil inventories and spare-production capacity rising, but clearly not enough to offset the unrest
""
<shines fingernails> ;)
Anyone at TOD wanna get involved with Oilcast.com by the way?
Anyways, keep up the good work TOD, you're v good.
best
adam
I wanted to set it up so it could at least pay for itself in some way but after looking around a lot and going into long discussions with three parties, one or two things ended up getting in the way. It's a bit of shame but you never know...
best
ap
I might. Click on "Dave" (right under personnnel) for contact information.
Sure we're "improving"! We're "improving" our way to the 100$ dolar barrel! How much denial can you take?
Congratulations to you Adam Porter at Oil Cast, for your great work.
http://peakoildebunked.blogspot.com/2006/04/279-many-wrong-predictions-of-ken.html
http://peakoildebunked.blogspot.com/2006/03/264-simmons-predictions-flop.html
http://peakoildebunked.blogspot.com/2006/03/259-ken-deffeyes-starts-backpedaling.html
http://peakoildebunked.blogspot.com/2005/10/122-colin-campbell-wrong-again.html
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 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.
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:
Then there is this exchange with Tim Russert
He ducks the question, never makes a price prediction:
So how does Red Hen justify saying that Double-speak Yergin correctly predicted $80?
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...
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".
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).
-------------------
http://www.thenation.com/doc/20060731/editors
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?
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?
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.
But yes, an interesting bout
Evans promising that production will exceed demand at least through 2011 ... the "fundamentals" at play as always
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.