This sort of puts everything into perspective. No pun intended.
Oil Price Forecasting Lessons From 2008
The Bakken boom began in eastern Montana in 2000, and in western North Dakota in 2007. The Bakken boom did not go boom until 2010 or thereabout and did not hit its stride until about 2012, at which point production records were being posted every month until the Saudi Surge, October, 2014.
On my calendar I have this note: "on August 1, 2008, a talking head on CNBC said we would see $200 oil before we saw $100 oil."
Well, we never saw $200 oil and we passed $100 so fast on the way down to $45 one can argue he may have been right. If he blinked, he did not see $100 oil on its way down to $45. LOL.
Forbes had a look back on the forecasting lessons from 2008 back in October, 2015.
First, the talking head who predicted $200 oil just as the Bakken was taking off:
But there was a section of the industry who steadfastly insisted the prices had not reached a peak. T. Boone Pickens, for example, when prices dropped close to $100 by late August insisted that “In two or three years, we’re going to be at $200 a barrel—could be $300 a barrel for oil.”
The late Matthew Simmons echoed Pickens’ price forecast at roughly the same time. The funny thing is that for several years, he had shown audiences a slide that had the famous Economist cover titled “Drowning in Oil” from 1998, in which the write-up predicted prices would remain at $12 or lower.
Next to it, he displayed the cover “We Wuz Wrong” produced after prices soared. His reward was a story about him, which appeared July 10, just two days before the price peaked.
What’s amazing is the extent to which some remain unflustered by past predictions. When Pickens was reminded last year that he had been wrong about peak oil by CNBC’s Joe Kiernan, he exclaimed, “I’m the expert!” and continued to insist that oil production had peaked in 2005—if you ignore US shale (and NGLs and biofuels, which he doesn’t mention). [Wow!]
Simmons had the same certainty, saying in September 2008, “I find it ironic that here we have the biggest industry on earth, and I’m one of the few people to figure out that we have a major problem.” Occam’s Razor would suggest that maybe he was wrong.And the Forbes contributor dares to write that the Hubbert curve is an incorrect theory:
As I argued in my 1994 paper, “The Failure of Long Term Oil Market Forecasting,” the problem is not just the uncertainty about both fundamentals and geopolitical trends, but the tendency to embrace incorrect theories, from the Hotelling Principle to Hubbert curves. Avoiding such a trap might not yield an accurate forecast, but it should help you beat the other hikers.I am aware of Hubert's theory but the Hotelling Principle is new to me:
This theory proposes that owners of non-renewable resources will only produce a supply of their product if it will yield more than instruments available to them in the markets - specifically bonds and other interest-bearing securities. This theory assumes that markets are efficient and that the owners of the non-renewable resources are motivated by profit. Hotelling's theory is used by economists to attempt to predict the price of oil and other nonrenewable resources, based on prevailing interest rates.