I post this as a warning to you, my loyal readers, as well as a reminder to myself about trusting… well anyone really. (It turns out I have very little trust in individuals. Chalk it up to experience.)
We often hear “experts” warn of $200/barrel oil, or $5/gallon gasoline, or peak oil, or global temperature increases of 10ºF, or oceans rising by 1 meter, or blah blah blah.
I’m sure there are plenty of experts who do good, solid work. Those people are probably the ones you never hear from, however. Perhaps the people who are good enough to actually make money with their expertise don’t feel the need to spout off about their superiority. For example I’m almost broke. Look at me rant and rave.
As you should have noticed, I spend a fair amount of my time tracking energy markets and energy technology (Allah willing I’ll be an energy trader in 9 months and an “expert” to some degree.) At least daily I check the price of crude, NYMEX gasoline futures, etc.
Bloomberg always has little articles about recent market developments which explain recent price movements (as I’m sure all financial news networks do). On Wednesdays the Energy Department releases data on energy stockpiles. Usually on Tuesdays they publish average anaylst predictions of the change in those stockpiles. For about a month I have paid attention to these forecasts and I have noticed they tend to be horribly, horribly wrong over and over and over again. Today:
Crude oil supplies slipped 109,000 barrels to 324.8 million last week, the report showed. A decline of 1.7 million barrels was expected, according to the median of 13 analysts surveyed by Bloomberg News. The drop left supplies 6.3 percent higher than the five-year average for the date.
(Distillate and gasoline increased by a combined 8.82 million barrels last week)
Last week the analysts were stunned to hear that distillate stockpiles had skyrocketed. After the announcement CNBC trotted out some guy explaining — and I paraphrase — that “of course stockpiles rose. Distillate sells at much better margins than gasoline and refiners are logically maximizing distillate output.” Distillate, by the way, is the category of refined oil which includes heating oil, diesel, and jet fuel.
Things are apparently not obvious or this guy would have been on TV before the official release of data.
But being loud and predictive is only good until you’re proven wrong. Among those types are those who claimed decades ago that the world was overpopulated and that we’d all be starving by now, and the crime experts, and the peak oil enthusiasts who said output absolutely would have decreased by some time about 15 years ago.
My advice is that when someone gives you long-term forecast that scares you, they’re also bullshitting you. Listen to them. Laugh at them. Then go on about your business.
