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I don't know anything about oil, but it seems unrealistic to claim to be able to predict markets. Liquidating all your reserves at current price is unlikely to

I don't know anything about oil, but it seems unrealistic to claim to be able to predict markets. Liquidating all your reserves at current price is unlikely to be seen as a wise move. (And wouldn't selling more oil than the US uses annually impact prices somehow?) If you magically had knowledge of the range of prices over 10+ years you could do all sorts of money making things. Edit: Looked into this a bit. Futures on oil 2 years out are already over $50. So "the market" is far less certain then the author. I'd also imagine quite a bit of damage to oil producers if the price stays low. After they shut down, why wouldn't the price rise?

ryanjshaw 11y ago
> I don't know anything about oil, but it seems unrealistic to claim to be able to predict markets. The author's position is less about predicting markets than it is about "if you're operating a horse & buggy business in 1885, you're best off winding it up". The debate here seems to be about whether 'today' is 1885 or 1855 or 1825, so to speak.
- MichaelGG 11y ago
  He clearly states a price range of $30-50 and the entire argument is built on that the price won't go up. (Otherwise why sell at 36?) The much weaker argument of "over decades oil will have less importance" doesn't seem to be his argument at all.
- lsc 11y ago
  Eh, I would argue that it's different from buggy whips, because there is a (somewhat) limited supply of oil. The idea being that if it turns out you are off by a few years (or a few hundred years) in the buggy whip vs. car situation, and buggy whips are a thing for a while longer, well, it's not that hard to ramp up buggy whip production. I mean, you've got some training effort, sure, but there are more buggy whips to be made. The idea is that oil is different, simply because there's only so much of it. If it turns out you planned wrong and have to come up with a few more year's worth of oil, and you are out? yeah, you have a serious problem. As an aside, the hole in my argument is what was shown by oil shale. There is a lot more oil available at $100 a barrel than there is available at $20 a barrel. but the point is that at some point, we'll actually run out of the stuff, and even before then, we won't be able to make more oil the same way we had made more oil in the past; to get more oil, periodically, you need to come up with new ways of getting oil, usually at great expense.
nandemo 11y ago
Not clear what you mean in your edit, but you might be reading too much into the futures price. The futures market by itself doesn't provide a magical way of predicting the price of oil in 2017. Roughly, since oil can be stored the best predictor we have for the price of oil in December 2017 is the current spot price, adjusted for borrowing costs and storage costs. Let's say the current price is $40, and it costs $10 to store a barrel for 2 years. If the 2017 price were too high, say $100, you could make a profit by borrowing $50, buying a barrel and storing it, and selling a futures contract today; in 2017 you would collect $100, pay back $50 + interest, and would still make a profit. So -- again roughly -- the futures price is as good a predictor as the current spot price. E.g. if we had an oracle that told us of a sudden shortage in 2017, that would cause an increase the futures price, but it would also immediately cause an increase in the current spot price.

ryanjshaw 11y ago

> I don't know anything about oil, but it seems unrealistic to claim to be able to predict markets. The author's position is less about predicting markets than it is about "if you're operating a horse & buggy business in 1885, you're best off winding it up". The debate here seems to be about whether 'today' is 1885 or 1855 or 1825, so to speak.

MichaelGG 11y ago
He clearly states a price range of $30-50 and the entire argument is built on that the price won't go up. (Otherwise why sell at 36?) The much weaker argument of "over decades oil will have less importance" doesn't seem to be his argument at all.
lsc 11y ago
Eh, I would argue that it's different from buggy whips, because there is a (somewhat) limited supply of oil. The idea being that if it turns out you are off by a few years (or a few hundred years) in the buggy whip vs. car situation, and buggy whips are a thing for a while longer, well, it's not that hard to ramp up buggy whip production. I mean, you've got some training effort, sure, but there are more buggy whips to be made. The idea is that oil is different, simply because there's only so much of it. If it turns out you planned wrong and have to come up with a few more year's worth of oil, and you are out? yeah, you have a serious problem. As an aside, the hole in my argument is what was shown by oil shale. There is a lot more oil available at $100 a barrel than there is available at $20 a barrel. but the point is that at some point, we'll actually run out of the stuff, and even before then, we won't be able to make more oil the same way we had made more oil in the past; to get more oil, periodically, you need to come up with new ways of getting oil, usually at great expense.

nandemo 11y ago

Not clear what you mean in your edit, but you might be reading too much into the futures price. The futures market by itself doesn't provide a magical way of predicting the price of oil in 2017. Roughly, since oil can be stored the best predictor we have for the price of oil in December 2017 is the current spot price, adjusted for borrowing costs and storage costs. Let's say the current price is $40, and it costs $10 to store a barrel for 2 years. If the 2017 price were too high, say $100, you could make a profit by borrowing $50, buying a barrel and storing it, and selling a futures contract today; in 2017 you would collect $100, pay back $50 + interest, and would still make a profit. So -- again roughly -- the futures price is as good a predictor as the current spot price. E.g. if we had an oracle that told us of a sudden shortage in 2017, that would cause an increase the futures price, but it would also immediately cause an increase in the current spot price.