Fatuous Forecasts

Posted by: David Welch on June 16, 2008

Enough is enough. During the long run up we’ve seen in oil and gas prices, more than a few oil executives and investment firms have predicted a rise in crude prices. Some of them were even based on actual market fundamentals. In many cases, either the executives selling the oil or investors who would benefit from more lucrative futures contracts have done the prognosticating. I’m sorry, but these forecasts are sounding fishier than Prince William Sound after the Exxon Valdez spilled its contents into the local ecology in 1989.

Witness OAO Gazprom CEO Alexei Miller, who on June 10 said oil prices could hit $250 a barrel. A June 16 story in Bloomberg added a cold dose of fear by saying that food prices would double, airlines would be nationalized and consumers would generally be miserable. The U.S. would go into deep recession, as would Europe, Japan and emerging-market economies. Good thing Miller’s forecast isn’t credible.

Am I the only who finds the price forecast coming from someone who stands to benefits from another price spike to be a bit dubious? Apparently not. A few economists and experts quoted later in the story say that prices won’t reach that level. But Tom Kloza, the chief oil analyst for the Oil Price Information Service, hits the nail on the head when he said, “It’s silly to take people with incredibly vested interests as having an unfettered, unbiased opinion.” Um, yeah. Thank you, Tom.

Reader Comments

Scambuster

June 19, 2008 5:59 AM

Once a upon a time in USA around the late 1800's, when there were political courage and leadership,
Congress passed a series of anti-trust laws that broke the backs of the "Seven Sisters" oil monopolies that dominated the crude oil and refinery business. Abusing their pricing power and influence, these giant vertically integrated oil companies were harmful to the national economy. After suffering under the thumb of the oil monopolies for years, the people finally had enough. Sherman Anti-trust Act and later the Clayton Anti-trust Act were passed to reign in the excesses of these oil and other monopolies. The "Seven Sisters" were broken up so as to increase competition and reduce price fixings. About 20 years ago, the exploits and abuses of the Seven Sisters were but a distance memory and at about that time the fortitude of our politicians were increasingly compromised with lobby money. The result was that the heads of the "Seven Sisters" were allowed to re-merge together to form mega-oil monsters called Mobil-Exxon, Texaco-Pennzoil, BP-Royal Dutch Shell, Union-76, Atlantic Richfield-ARCO, Phillip66. Former big name competitors like Gulf, Standard Oil,Pennzoil, and Speedway, were devoured as well as the independents mom-and-pop gas stations like Lerners, Quick-stops, etc,etc. Today, through past manipulation(buying out) of the politicians, the Seven Headed Sisters have regroup as a menace to the national economy. As essential resources for the functioning of a modern society, electricity, water, telephone, and natural gas have been subject to goverment control by way of public utility commissions. The Seven Sisters have not only escaped the public utility designation because of their generous political contribution but also received oil depletion allowance, a type of special government subsidies paid by the tax-payers. The clever Big Oils even have special tax breaks that on the average reduce their income tax to almost nil while reaping $billions in profit. Anyone who believes that money don't buy politicians and special laws should look no further than Big Oil. Welcome to America, the land of opportunity..... for Big Oil, that is.

NS

July 1, 2008 7:40 AM

Whether oil reaches the predicted levels or not, it is still prohibitive in many parts of the world. The demand for alternative powered vehicles has never been higher.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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