Saturday, November 3, 2007

“I am right, the whole world is wrong”

That seems to sum up the simple minded reasoning of the “energy cornucopians”, with Daniel Yergin their chief Elf saying:

“Oil prices are becoming increasingly decoupled from the fundamentals of supply and demand,” Dr. Daniel Yergin, chairman of Cambridge Energy Research Associates, said today in Washington D.C. “With prices over $90 a barrel and strong anticipation of $100, the oil market is showing signs of high fever, stoked by fears of clashes in the Middle East and resulting disruptions of supply.” -Front Page, CERA website, October 29, 2007

You got that, you dumb ass oil traders? You guys (that would include me) are all wrong!!! You don’t know what you are doing!! Daniel Yergin, Pulitzer Prize winning author and economist, Master of Time, Space, and Dimension, Wizard, and Grand Pooh Bah says we are a bunch of dummies and we know the price of oil and the value of nothing!! The “Fundamentals” do not support the current market price!!!!

OK, I’ll bite.

Dear Dr. Dan “The Man” YerGan:

What f#$%%!! fundamentals are you referring to? Why do you not publish your data? Please! Just post your summary data on the largest 50 oil fields! Then we will actually have something to compare the supply and production data to when it comes in. You know, that pesky “scientific method” you’ve heard tell about while completing your Doctorate. Even a dumb trader like me has heard of the “scientific method”, and I don’t have the benefit of a Ph.D.

The following is from G.R. Morton’s website:

February 2002
Technology may help combat volatile oil prices, study suggests.... 
$6.95 - Oil and Gas Investor - - Feb 1, 2002
"oil prices are projected to average $20 a barrel in 2002, compared with approximately $26 in 2001, CERA president Joseph Stanislaw said."
What was the reality? Well in 2001, according to the BP Statistical World Review of Energy, the price of WTI averaged $25.93. CERA predicted $20, but BP says the actual number was $26.16--totally in the wrong direction. The price went UP, not down as CERA said.

February 2003
US commercial oil stocks reach low 
Subscription - Financial Times - Feb 20, 2003
"Cambridge Energy research Associates (Cera), the Boston-based consulting group, expects world oil prices to drop after any war to the low to mid $20 range."
The reality was that the average price in 2003 was $31.07 and the price never did fall into the low $20's range after the Iraq war.

February 2004
As Demand Rises, Oil Firms Focus on Finding New Reserves, Expanding...
$6.95 - Dallas Morning News - - Feb 11, 2004
"Oil prices are expected to remain in the upper $20 to low $30 per barrel range through 2005, CERA Analysts said Tuesday. "
The reality was that the price ended up at $65 at the end of 2005. Wrong again.

June 2005
Putting a cap on oil supply worries.
Subscription - Dallas Morning News - HighBeam Research - Jun 22, 2005
"The growth in oil supplies could force prices well below $40 a barrel as early as 2007, The CERA report said."
This is a full paragraph report on the same claim
"In a June report, CERA said it believed that between now and 2010 there will be a substantial increase in worldwide oil production capacity, providing a supply cushion of 6 million to 7.5 million barrels per day that could cause oil prices to "slip well below $40 a barrel as 2007-08 nears."Peter Enav, "Uncertain Saudi Supplies Hold Key to China's Growing Thirst for Oil," Pittsburgh's Post-Gazette,
This year, started at oil in the mid $50s but as everyone knows, we are now at $80/bbl. Cera's perfect record continues.
It was this prediction, which caused Jeff Brown to declare "Daniel Yergin Day," when, contrary to Yergin's prediction of $38/bbl, the price reached twice that value in little more than a year!

As near as I can tell, CERA and Yergin took 2006 off and didn't predict future prices. Indeed, the few comments made in 2006 seemed to indicate that Yergin and CERA were beginning to get the idea that the fundamentals of supply and demand were favorable for higher prices. Yergin was quoted as saying:
“The world oil market is in the grip of a slow-motion supply shock, in which a $70 to $75 barrel price reflects an aggregate disruption of over 2 million barrels a day,” Daniel Yergin, the chairman of Cambridge Energy Research Associates, said in remarks this week at a Washington energy conference.
But, it appears that he was right, but for the wrong reasons. On July 15, 2006 he ascribed the rise in price to geopolitical tensions:
Subscription - All Africa - HighBeam Research - Jul 15, 2006
"the oil price has become a register of geopolitical tensions and fears," said Daniel Yergin, who heads Cambridge energy Research Associates."
According to this theory, I presume, if Rodney King had his way, and we could all just get along, oil prices would plummet. If this is the true explanation for the rise in oil price over the past 5 years, the world must be becoming more geopolitically tense and fearful.

June 2007
But as we enter 2007, Yergin and CERA are back pounding the drum that oil prices will fall. This is what I heard Yergin imply on Larry Kudlow's program. It reflects what he said in print earlier in the year. In June, 2007, a Yergin interview reported this:
"ISTANBUL, June 27 (Reuters) - World oil prices will drop to the low $60 range by the beginning of next year as long as the security premium in the world oil market does not rise, said Daniel Yergin, chairman of Cambridge Energy Research Associates. "

OK, I am back.

Now look in every article you see in ANY media story about future oil supplies. Notice anything? Why is Daniel Yergin the media go to guy in over 80% of the articles on oil supply in Lexis/Nexis? The guy has NEVER been right in his prognostications on oil prices, so again, why is he the "expert" the media wants to talk to? Because he won a Pulitzer Prize?

Wikipedia says of the Pulitzer Prize:

"The Pulitzer Prize, pronounced /'pʊl.ɪt.sɚ/ ("PULL-it-ser"[1]), is an American award regarded as the highest national honor in print journalism, literary achievements, and musical composition. It is administered by Columbia University in New York City."

How, exactly, does that qualify Dr. Dan the Man YerGan as an expert on Oil prices? Particularlly since he hasn't been correct on Oil prices since Noah built himself a boat? And who in their right mind would continue to hire this meally mouthed cheese brain and his inept forcasting firm when they could have hired someone who has been DOBA (if you don't know these acronyms just Google them), like yours truly? I will tell you who - parties and organizations interested in misleading the public for their benefit - and your detriment.

Folks, you are being purposely misled. By whom, and for what purpose, well, that is another story. Not much into conspiracy theories myself. But this is just too much coincidence for your BS meter not to be going off in the red zone.

"That's all I have to say about that" Forrest Gump

Mentatt (at) yahoo (dot) com

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