Wednesday, July 13, 2016

Spectacular Panoramic View Of The Grand Canyon -- July 13, 2016; The Perils Of Forecasting The Price Of Oil

Following various links from this story led me to this post, an audio, panoramic view. It worked fine for me on Firefox.

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.
Much more information at wiki, as usual, but it will make your eyes glaze over.

Illinois Seeks To Shut Down ObamaCare Insurer
Another ObamaCare Non-Profit Health Insurer May Fail


July 15, 2016: from Forbes -- Land of Lincoln Health to liquidate -- not an ObamaCare problem but a co-op one. 
The answer being that it’s not true to say that there’s nothing wrong with the co op model. If there were nothing wrong and they also really did have that extra effect from worker of customer participation, then they would always out-compete capitalist firms. And this far along in the process, we wouldn’t have any capitalism, we’d only have a market of socialist enterprises. Thus there must be something wrong with co ops, some Achilles Heel. And there is–it’s the difficulty they have in gaining access to capital.
Here it’s that one specific payment which is the straw that breaks the camel’s back. But that one single payment alone isn’t enough, that’s just the latest and most specific problem. For the one thing that capitalists really do bring to an organization is capital. And that’s something you need to weather the vicissitudes of changing times and more especially the costs of getting an organization up and running. This is also the basic problem that many of those co ops set up under Obamacare’s face. As they don’t have shareholders, they can’t go to them to ask for more capital. If they were to ask their owners, those who buy health insurance, they’d just be shrinking the company even faster. That’s also why such co ops haven’t taken over the economy because they do just find it that much more difficult to gain access to capital.
July 13, 2016: from Americans for Tax Reform --

Sixteen Obamacare co-ops have now failed.
Illinois announced that Land of Lincoln Health, a taxpayer funded Obamacare co-op, would close its doors, leaving 49,000 without insurance.
The co-op now joins a list of 15 other Obamacare co-ops that have collapsed since Obamacare has been implemented. Failed co-ops have now cost taxpayers more than $1.7 billion in funds that may never be recovered.
Co-ops were hyped as not-for-profit alternatives to traditional insurance companies created under Obamacare. The Centers for Medicare and Medicaid Services (CMS) financed co-ops with startup and solvency loans, totaling more than $2.4 billion in taxpayer dollars.
They have failed to become sustainable with many collapsing amid the failure of Obamacare exchanges.
Since September, 13 Obamacare co-ops have collapsed, with only seven of the original 23 co-ops remaining. Illinois’ Land of Lincoln co-op faced losses of $90 million last year and is suing the federal government for the deficit caused by Obamacare. Co-ops across the country have struggled to operate in Obamacare exchanges, losing millions despite receiving enormous government subsidies.
Original Post
The Chicago Tribune reports. Data points:
  • Land of Lincoln Health
  • 49,000 people affected
  • LOLH: deteriorating financial condition; required to pay $31.8 million to other insurers "under a complex formula in the Affordable Care Act, which aims to keep premiums stable by balancing risks among insurers
  • LOLH: lost $90 million last year (2015)
  • federal Centers for Medicare/Medicaid Services refused to bailout LOLH
  • LOLH: one of 23 non-profit health insurers; $2.4 billion in Obama money to jump-start these 23 NPHI
  • the goal of the NPHI: an alternative to Big Health like BC/BS
Add LOLH to the other twelve or thirteen or fourteen of the original 23 NPHI that have failed.

Obama and Hillary now want to substitute a British-NHS-like "public option" instead of the NPHI. A federal US-NHS is gonna cost us a lot more than $2.4 billion. Say, $2.4 trillion? As a start?

By the way, a reader reminded me yesterday that BC/BS was exiting Minnesota (MNsure). I guess this would be a Blexit.

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