For years, I have heard enough and more left-leaning people, especially within academia, beat up on oil companies and their profits. (Meanwhile, I was beating up on the company that makes the computers that the left-leaning people love to use--for the sheer audacity with which it earns gazillions while portraying a saintly image!) The evil oil corporations, the story went, did everything possible to increase their profits. Even launched wars, with the government as their proxies. The bad oil companies did their best to stifle innovation with the development of the electric car, they argued, because the electric cars will not need oil (gasoline.)
I wonder what they will complain about now, with oil prices tumbling to levels that nobody predicted. "Peak oil" and the evil corporations together means soon we will be looking at $200 per barrel, they warned us. The cold, hard, news of today is this:
Brace for $40-a-barrel oil.So, whatever happened to that framework of the evil oil corporations that want to earn those huge profits? Why are they now practically giving away gasoline at the pump?
Meanwhile, the company that I love to beat up on is as busy as ever storing its gazillions at tax havens, far away from the taxman and gets a free pass from the left-leaning folks who continue to target the oil companies. Oh well, a strange world this is!
So, about that oil price. How come from the experts to the conspiracy nutcases, everybody got it so wrong? Well, re-read the Yogi Berra quote in the subject line!
Of, if you want an oil-specific quote:
When contemplating the future of oil prices, one should always keep in mind U.S. foreign service officer James Akins’ observation, “Oil experts, economists, and government officials who have attempted in recent years to predict the future demand and the prices of oil have had only marginally better success than those who foretell the advent of earthquakes or the second coming of the Messiah.” Akins wrote that in 1973.Isn't that a lot more words than the simple Yogism? ;)
Ron Bailey, whose note in Reason is where that quote is from, includes another quote there from a Saudi billionaire who claims that oil will never go back up above $100 a barrel. Say what?
In a commentary at Project Syndicate, is another interesting question:
should we expect $50 to be the floor or the ceiling of the new trading range for oil?Say what? This commentator expects oil prices to go well below $50? Whatever happened to greedy oil companies and their profits?
economics and history suggest that today’s price should be viewed as a probable ceiling for a much lower trading range, which may stretch all the way down toward $20.Are you kidding me?
the marginal cost of US shale oil would become a ceiling for global oil prices, whereas the costs of relatively remote and marginal conventional oilfields in OPEC and Russia would set a floor. As it happens, estimates of shale-oil production costs are mostly around $50, while marginal conventional oilfields generally break even at around $20. Thus, the trading range in the brave new world of competitive oil should be roughly $20 to $50.Don't bet your farm on this, as they say. Why? I refer you to the Yogi Berra quote in the title.
A couple of years ago, I received a snarky email from a former student. In the email, she referred to the stepped up production in the US thanks to fracking up the Bakken oil as evidence that I was bullshitting in the class. (Ok, she didn't use the BS word.) I wrote back to her that my worry has never been about exhausting the oil supplies or the price, but about the continued and expanded use of carbon as the source of energy and its impacts on global climate. Even now, though it is awesome to fill up a tank at a remarkably low price, I do worry about the long-term consequences of a delay in energiewende.
Maybe I should not worry about tomorrow and, instead, seek consolation in the Yogism, "It's tough to make predictions, especially about the future."