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One of the live oaks that bless my home

Friday, November 16, 2012

Delusions of Grandeur

In the last few days, two top newspapers in the U.S., The New York times on the left and The Wall Street Journal on the right, have come up with unusual predictions of the future oil might of our fair United States of America.  I tried to link to the "Report Predicts U.S. as No. 1 Oil Producer in a Few Years," by Elisabeth Rosenthal, published on page B1 of The New York Times on 11/13/2012, but this link did not exist. I guess, Ms. Rosenthal's article belongs to the category of All News Fit to Sweep Under the Rug. The unsigned agitprop piece in The Wall Street Journal: "Saudi America - The U.S. will be the world's leading energy producer, if we allow it,"  dated 11/12/2012, still adorns the Web.

At best, the authors of these two articles have shown a lack of rudimentary understanding of what is needed to increase oil production in the U.S. to the short-term levels implied by their narratives. At worst, they purposefully misled readers. Even the already biased sources both these journalists quoted were misunderstood and misquoted.

I do not mean to suggest here that reasonable and thoughtful journalists do not report on crude oil-related issues. They do, as you can see here, for example.  In another example, Leonardo Maugeri's unfortunate "Harvard Report," twice parroted by the New York Times, was nicely picked apart by Mr. Olivier Rech, an experienced analyst. Based on my own calculations, I agree with Mr. Rech; so does the Deutsche Bank.

Why so much wishful thinking pouring out with such intensity? The reasons could be many, one more bizarre and counter-productive than another. My previous blog sheds some light on the empty idols driving this delusional behavior. The sad part is that I had to endure dozens of emails from excellent but disoriented specialists, who desperately tried to make sense out of this nonsense and could not.

And what about the generally clueless, but misled-again public? They might get really upset when the price of gasoline reaches new highs. After all, that's all the U.S. public cares about, forget the subtleties of supply and demand, global markets, local gasoline markets, imperial propaganda, and the environment.

P.S. The unusually opportunistic and servile (I know it from the insiders) journal, Nature, just published an interesting commentary by Jeremy Grantham, who is the co-founder and chief investment strategist for GMO, a company richly invested in oil and gas ventures.  The commentary and the readers' comments nicely dovetail with this post. If Nature can think independently, so can you.