What do you mean looking good so far? The 2010 strip would have to double for Simmons to win his bet. Furthermore, if he is serious, why is he selling books and making publicity bets when he could quietly buy the strip on a margin and become a very, very rich man? To be fair, maybe he has done that, but if you really know something nobody else does, it’s best to keep it to yourself.
The thing is, everybody knew that the Saudi’s might be fibbing. People have been investigating it for years. Simmons did not have any proprietary data as far as I know. He used mostly SPE data that anyone could get. I used to work with a guy that got into Aramco’s control room to monitor production (sure, they may have had fake instruments). There are people who secretly hang out in OPEC ports to monitor tanker loading and look at how low the ship rides to see if everything adds up. And even if Simmons discovered something nobody had thought of before, the market didn’t believe him. That’s a strong indication (but not a perfect indication) that he’s wrong.
My point is, it’s impossible to figure out much about the world’s most widely traded commodity that isn’t already priced into the market. And I think Simmons and his ilk damn well know this. And he might get lucky. Iran could get nuked, hurricanes could knock over platforms, what ever. But it would be stupid to bet on it.
It’s like last years college football season. Appalachia State beat Michigan, but would you not call anyone who bet money on Appalachia State (without points) a fool, both before or after the game?
Depends on what his goal is. If he simply wants to get richer (I gather he’s already quite comfortable), then sure.
But maybe he’s a fucking idealist, and wants the world to have a bit more time to prepare than it otherwise would have.
So, let’s see: everyone else knew the Saudis were probably fudging, so Simmons didn’t know anything new. But he’s still wrong. Even though production seems to have flattened out, particularly in Saudi Arabia.
It sure wasn’t priced into the market when Simmons’ book came out, was it?
Whoever all these people were who suspected the Saudis might be fibbing, the market didn’t seem to be responding to their suspicions. Your hodgepodge doesn’t add up.
And the bet - well, you know what? Oil cleared $140/barrel earlier this year. Would it surprise me if it cleared $200 in 2010? Would I consider Simmons wrong if it only got up to $180? I’d say he’d lost the bet, but won the point.
Say, how do you buy and sell oil futures, anyway? Everytime I try to figure out how it all works, I get nowhere.
IOW you gots nuffin…as usual. Just a drive by link to an article you probably only vaguely grasp.
You are just to stupid for words. I’ve explained to you over and over again that it’s NOT just demand…but seriously, you have the intelligence of belly lint and can’t comprehend that the answer is more complex than ‘Evil Speculators are doing it ALLLLLL!’ (and the irony? I’m not even doing a strawman there, that really IS your position).
You keep trying to put the same old strawman on my (and anyone else who disagrees with you), and you keep getting slapped down for it because no one is saying what you seem to THINK they are saying. I’ll ask again…let’s see a cite of me saying that demand is the only thing driving the price. Feel free to look in any thread I participated in. If you can’t find it then seriously…STFU about this strawman already. Just stick to your stupid drive by posts as that seems to be all you are capable of, ehe?
Yes, inevitable. It appears you think the free market will decide for us. What free market, especially oil? Oil is the strategic commodity. The market plays a role in its price and availability but it doesn’t control it. We are at war because of it.
The '70s oil shocks should have been a wake up call. Never happened. Now it’s happened again. Business reacts to oil prices; it doesn’t act. Sure, there are lots of “alternatives” beginning to pop up. Yup, business reacting to meet demand, and little more. Car manufacturers fought increasing fleet mileage because it reduces their profits to shareholders. So they lobby (bribe?) Congress to not go there. Business only does what it does for itself and its shareholders, and little else, unless required by government regulation.
Sure there’s private innovation and incentive to do better. But it’s based on ROI. What is needed is a strategic plan for the country and its energy use, not a hopscotch approach with greenie commercials to make us all feel good.
Here’s just one example. It’s time to overhaul the long-distance trucking industry. Anything shipped over, say 500 miles, goes by rail, or more accurately TOFC (trailer on flat car). Get the long hauls off the roads. Beef up the more efficient rail system. Your UPS package will still get dropped at your door by a local UPS driver and truck. But your package won’t be transported by a wasteful long-haul truck. Instead, it will go by truck from the distribution point to a UPS center when it gets put on rails to the local terminus where it gets put back on a local truck to you. With long hauls off the roads, highway maintenance costs should go down. Return those costs to the taxpayers, or better still, invest in mass transit long haul rail corridors (to take the pressure off the failing airline industry).
Ultimately, the real issue is to change attitudes across the board. Four day work weeks. Telecommuting. Turn off the damn lighted store signs an hour after the place closes for the night. Voluntary measures at first, but when that doesn’t work, regulate it. Sorry, but the choice is we do it now, across the board or the inevitable will force us into it, often with worse results. If you want to bitch and moan about rights and government intervention, save it. We ain’t been “free” for a while and the last eight to ten years even more so.
It’s all about the old Framm oil commercials; you can pay us now or pay us later. I just think Americans are selfish and greedy way too much that we will pay later, despite knowing we could have paid for it now.
(Besides, the biggest energy shock hasn’t hit yet and it’s not oil. It’s fresh water.)
Well, the dust jacket on my copy of his book says I paid $24.95 for it, maybe I should ask him for a refund and thank him for the generous warning.
I don’t know that he’s wrong. The market just doesn’t believe him. The forward curve is flat at least 8 years out. If the market believed him, it wouldn’t be. Perhaps I wasn’t clear in my last post. I don’t mean that people knew Saudi Arabia was fudging; I meant everyone was suspicious of Saudi Arabia already and have been for years. They play their hand close, and everyone knows that. There are lots of groups around the world that model global production. These groups employ petroleum engineers, and these engineers would likely look at SPE data. I’m not a petroleum engineer, and if I was trying to model an oil field that we don’t know much about, SPE is the first place I would look. If you think some engineer from Texas is going to tell those New York and London boys how things are done in the oil patch, well, it just doesn’t work like that.
And keep in mind, in a place like Saudi Arabia, you can’t use normal production forecasts. Among other things, there are cartel issues, absorption rate issues of cash into the economy (you can only build so many roads, so you might actually ratchet back production at higher prices), and the fact that oil may be safer in the ground than cash in the bank to the people in charge. (Oil is harder to extract from the ground than gold from a vault if shit went down). Of course they might be in serious decline, I’m not saying they aren’t, but flat production in Saudi is less evidence of that than flat production in Mexico, for example.
Yeah, I think it almost certainly was, though I’m not willing to look into daily price movements with the noise separated out on key dates corresponding to the book or any pre-book speeches or papers. I don’t even know how popular press titles are released, if there’s much leaked before the publication date.
All I’m saying is any evidence of fibbing or lack there of was incorporated into the price before and after Simmons, Simmons having little or nothing to do with it.
Keep in mind the average price must stay above $200 for the entire year. Hitting $200 at least once is much, much more likely, especially with increased volatility but I would personally bet against it. If one was so inclined, they could use a Black-Scholes option pricing model to determine the relative likelihood of such an event. This would tell you the value of a bet made to those ends in dollar terms.
Do you want to know how it works in textbooks, or specifically how it done in the real world? On NYMEX for example you have to buy 1000 barrel contracts, so it’s not really for the average person, although maybe there are outfits that break those up.
The problem with this is you assume you know not only what the problems are but what the correct solutions are…and you are willing to implement them by fiat on that basis. And to justify it you use the (artificial) oil crisis of the 70’s…and the fact that people didn’t get it and change their selfish ways.
Why exactly they SHOULD have gotten it is a mystery. The ‘crisis’ was manufactured…and after all the smoke had cleared we were back to cheap, plentiful oil. And we are STILL there, though as you noted the prices are climbing.
Want to REALLY effect all those potential changes you mentioned? Simple…just let the price of oil and refined fuels continue to rise. Maybe even tweak the price a bit by increasing taxes to keep it rolling upward. THAT will effect the changes much better than just trying to use the government to hammer through a laundry list of supposed fixes…which may or may not even work and will probably have all kinds of unintended consequences.
IOW, yeah…let the market handle it. It’s pretty damn good at handling this kind of thing if folks would just let it. If you want to ‘fix’ something then simply tweak the market (make CO2 a real world cost both to industry and consumers, for example). Put pressures on business and consumers and THEY will find the optimal solutions to the ‘problems’ all on their own.
(ETA: BTW, agree with you about the water thingy…I’m more concerned about that than about either GW OR the supposed end of the world due to lack of oil)
My apologies. I really don’t want government to do it by fiat. What I’m saying is the free market really isn’t free, and when it comes to oil, it is the ultimate strategic commodity with government already with strings deeply embedded. The free market only goes so far and we take two steps back for every step forward while we wait for business to react to energy issues (providing energy companies gets its ROI and profits first), instead of a proactive approach.
Government needs to provide incentives, but not with the usual “do this or we neuter you.” Instead, specific defined and accountable benefits if business does positive things toward energy conservation, and alternative energy production. I don’t think government is truly up to it because Congresscritters have their own personal agendas. Congress is broken, we know it, and we like it that way. That’s why it’s inevitable. America, individually and collectively, ain’t got the balls to do it for the greater good and the long term health of society.
The feds are already gearing up on the water issue. It’s still early stages but it’s recognized that fresh water will beat oil as the strategic commodity. And on this issue, we don’t need to import it from the oil cartel countries.
I have to select articles from Bloomberg and such because they are generally conservative. I could do much more but I have to cull through the sources to find ones you might not claim are too radical. Your blind biases have to be considered.
Today I walked to the store. By the time I walked back gas had gone up 12 cents. That is probably due to the hurricane in the gulf. It has not hit yet. The price of crude dropped even lower today , headed back to 100. Yet they were speculating that there may be a problem and raised the price. Not because anything happened . But they speculated. If it fizzles ,no harm ,they just made a couple billion. They are not likely to give it back are they?
Renob ans XT ,the resident peak oil nutjobs are here. Showing how easy it is to stay wrong. Oil has dropped almost 1/3rd. The price should be below 3 bucks. Man are they raking in the dough.
Hey, dipshit. Care to weigh in on that previously mentioned fact of the Dollar gaining? Does that have nothing to do with commodity prices in your little world?
Man I’m glad you’re still here. I can take comfort in knowing I’m not the biggest douchebag on the boards.
I’m not sure what you are trying to say. The market in oil is essentially free. Yes, some nations have subsidies/constraints on selling gas. Yes, OPEC is a cartel. But the cartel doesn’t work so well, as the recent Saudi decision to ignore its demands show.
The high oil prices have sent signals that it’s a good time to invest in energy. That means investing not only in new ways to obtain oil but also in alternative energy. That’s the efficiency of the market at work. If it isn’t working fast enough to please you it’s a sign that you don’t have enough knowledge. Prices are the aggregate knowledge of billions of people.
Government mandates of increased care mileage have nothing to do with the market. As we are seeing now, when consumers demand cars that have better mileage, businesses provide them. How do you think businesses make money? They provide the goods and services that people want.
Requiring things by government regulation short-circuits the market. It substitutes the flawed thinking of politicians for the aggregate knowledge of the market. Congressmen have no idea what a proper fuel mileage standard is. They don’t know what the next alternative energy source should be. They make decisions based on short-term calculations about what will get them elected. Consumers working through the market, however, make decisions about what makes sense for them. When oil prices go up, they want cars that are more efficient. When prices go down they don’t want these cars. It makes perfect sense. We don’t need a government plan.
Why do we need a plan? When there truly is an oil shortage, prices will signal that. This in turn will signal people to use less oil and businesses to develop the most efficient sources of alternative energy. A plan presumes that we know what will work best and that we should head towards that. There is no way that you can come up with a plan that takes into account all the information that is reflected naturally in market prices.
Why do we need to overhaul long-distance trucking? Because you think so? The fact that it’s profitable means that the way we are doing things today is the most efficient use of resources. You seem to think that businessmen are idiots and that you know so much more than they do. If that’s the case, invest your money in a new distribution system or persuade others to invest in your idea. If you are right, you’ll be rich. Somehow, though, I think the guys who have been in the business for decades know what is the most efficient way to do things.
When energy sources truly are scarce, prices will rise to reflect that. Consumers and businesses will adjust accordingly. That is a much more efficient system than having bureaucrats trying and figure out what we should do.
Who speculated? Are you saying that the oil speculators are responsible for the price at your local store shooting up? I thought you were saying that oil prices were going down. Oil speculators were being blamed for oil prices going up, so if they are going down how can you blame speculators? Do you even know what speculators do?
And why should gas stations give money back to consumers? You bought gas at the price. You agreed it was a fair price for the product or you wouldn’t have bought it. You made a deal to purchase it so why do you think people deserve to get their money back?
Please tell me why you think oil should be below $3 a gallon. Nothing you have ever written indicates that you have even a rudimentary grasp on how any economic transactions work, much less any special insight into the oil market. But I’m prepared to be proven wrong.
In the meantime, I’ll continue to think that you are a complete dipshit, as others on here have said. Your ignorance is astounding. It’s even more astounding that you can’t see how stupid you are. I guess that’s a gift that is given by God to the dumb so they can lead happy lives.
A question for Sam, being from Canada how do feel about the Tar Sands production? Does Canada have as we have been told large reserves of oil in that form. Is it showing a profit?
How it’s done in the real world. Unless there’s some way to buy part of a contract and easily resell it down the road, I guess the answer is that that game’s too steep for me.
Awhile back, when oil was more like $60/barrel, one of the folks on this board asked me, if I was so sure the price of oil would keep going up, why wasn’t I putting my money where my mouth was? At the time, the answer was, I couldn’t figure out how to make an investment that would go up and down with the price of oil. But even then, 1000 barrels @ $60 would have been too much risk in a single investment.
Hold on. There have been a lot of discussions here in recent years about how oil prices work, and why that curve should be flat. Correct me if I’m wrong, but if oil was expected to be $200/barrel in 2016, then the price of oil per barrel right now would be the present value of $200 in 2016, because otherwise everyone would just stop pumping oil out of the ground and wait for prices to go up.
So while I’m willing to believe that, in some sense, the market doesn’t believe Simmons, it’s because the price of oil today is $102, rather than because of the shape of the curve.
My problem with all that, though, is that just a couple months ago, oil was trading at $140/barrel, so everybody believed something very different than they believe now. So what’s the new info? Or are we just looking at herd behavior on the part of investors?
OK, but SPE isn’t a database where a few keystrokes will tell you everything that’s known about a particular subject.
Simmons’ claim is that he had to go through over 200 papers published as far back as 1961, ferreting out a fact here and another there, to pull together the facts on which his book was based. That sort of research is a real pain in the butt, and you’ve got to be sufficiently motivated to do it. The availability of the articles through SPE doesn’t mean a hell of a lot. It’s not particularly hard for me to believe he wasn’t following in anyone else’s footsteps.
That all may turn out to be true. But the fact remains that Simmons presented a hell of a lot of good reasons to believe that the Saudi fields were at or near peak, and since I first heard of him a few years back, Saudi production has been consistent with Simmons’ hypothesis.
Well, he’d been raising the alarm for roughly a year before the book’s release that I know of. For instance, there’s this July 9, 2004 talk of his, back when oil was $40/barrel. But I expect the wise guys thought he was a crank.
Anyway, something wasn’t factored into the market when oil was $40/barrel just four years ago, because it’s 2.5 times that now, and that’s after its having dropped $45/barrel in just over 2 months. The noise in the price now is bigger than the price was then.
Whether or not the price of oil averages $200+/barrel in 2010 is immaterial, as long as, on the whole, its price keeps going up a good deal faster than everything else does. It still looks to me like (a) Simmons was basically on target, (b) he arrived at his conclusion well before the smart money did, and (c) it wasn’t some sort of Hail Mary, but something he researched and reasoned out.
I won’t comment on the rest of your post, but this is completely false. It’s roughly akin to suggesting to a farmer that since we can reasonably expect the price of wheat to be higher in 2016 than it is now, he shouldn’t sell this year’s crop but rather sit on it and wait for prices to go up.
Not if the resources are subsidized, which leads to a tragedy of the commons effect.
Trucking is more detrimental to the roads out of proportion to its fuel use due to the massive loads it puts on roads (not to mention the fact that fuel taxes in general don’t pay for sufficient highway repairs/expansions). I would support raising taxes on high-load usage of the roads in proportion to its detrimental effect on the repair of said roads.
That would be the most efficient use of resources.
