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Page added on January 16, 2014
Robert Rapier: Grading My 2013 Energy Predictions
Normally I would have had this out two weeks ago, but the 60 Minutes story has thrown me behind schedule. I continue to get lots of comments and questions about Vinod Khosla and now his righteous indignation over how the 60 Minutes story was portrayed (especially since that was the only part of my interview they aired), so I may follow up in a week or so to explain (once more) the precise nature of my criticism — as well as what it isn’t. To be honest, I am tired of writing about it, and I am sure that regular readers are tired of reading about it, but new readers continue to ask questions that indicate they misunderstand the nature of my criticism.
In the meantime, here is my report card for my predictions from last year. In the next article, I will give my predictions for 2014.
In January 2013, I made the following five predictions for 2013:
- Brent and WTI crude prices will both average less in 2013 than in 2012.
- The Brent-WTI price differential — which has widened substantially in the past two years — will narrow in 2013.
- The average annual price of natural gas — as measured by the Henry Hub Gulf Coast Natural Gas Spot Price — will be higher than in 2012.
- The Obama Administration will approve the northern leg of the Keystone XL pipeline.
- US oil production will continue to grow (but at a slower pace than in 2012), reaching the highest level since 1995.
So let’s see how I did. All information for commodity prices is from the Energy Information Administration (EIA).
1. This one was mixed. The daily average closing Brent crude price averaged $108.56/barrel (bbl) in 2013, down 2.8 percent from 2012′s average closing price of $111.63/bbl. West Texas Intermediate, on the other hand, traded higher. The average closing price for WTI in 2013 was $97.98/bbl, up 4 percent from the 2012 average closing of $94.05/bbl.
2. This one was correct. The average Brent-WTI differential in 2012 was $17.58/bbl. I based my prediction on the fact that there were a number of pipeline projects expected to come online in 2013, which would somewhat alleviate the glut of crude in the mid-continent region of the US. While I expected Brent and WTI to both trade down, I expected that WTI would hold up better as the glut was relieved, and this would narrow the gap. In fact, the gap almost disappeared entirely in the 3rd quarter, but had widened back out by year end. For 2013, the differential averaged $10.57.
3. This one was correct. In 2012 the average closing price for Henry Hub natural gas was $2.75 per million British thermal unit (MMBtu). I didn’t believe that low price could be sustained, as this is below break-even cost for most natural gas producers. So natural gas producers responded to the low prices by shifting drilling rigs from gas production over to oil production, and a number of predominantly gas producers shifted to more oil production. Thus, natural gas production was relatively flat in 2013, and prices firmed up to an average for the year of $3.73/MMBtu.
4. This was the only complete miss. I have been surprised at the inability of the Obama Administration to make any sort of decision on this pipeline. In fact, I also made this prediction for 2012, so the Administration has been kicking this can down the road for quite some time. But I have learned my lesson. I am not making any more predictions on the Keystone XL Pipeline.
5. This one was correct, except for the qualifier. US oil production did continue to grow, and in fact reached the highest levels since 1989. Final production numbers won’t be available for a couple of months, but through October 2013 US oil production averaged 7.4 million bpd — and reached 7.8 million bpd in September and October. Average daily production is 2012 was 6.5 million bpd, which was an increase of 800,000 bpd over 2011′s production. I was confident production would once more expand in 2013, but didn’t think the 2012 increase could be matched. At this point the huge 2012 production increase looks like it will actually be exceeded, with a final 2013 increase looking like about 1 million bpd over 2012′s production.
Overall, that’s not too bad for making predictions about the future. Only one complete miss of the five predictions, with a split decision on oil prices and an underestimate (probably) on the extent of the 2013 oil production increase. In next week’s article, I will make my predictions for 2014.
29 Comments on "Robert Rapier: Grading My 2013 Energy Predictions"
DC on Thu, 16th Jan 2014 12:45 am
Price is not a good indicator of where we are going. Its a poor proxy at best. Oil could drop back to $40.00 a barrel again tomorrow. If it did, it would mean no one could afford it at that price, except the rich of course. Which is why pays to be rich. Oil could be $200.00 this year. Again, only the rich could ‘afford’ it at the price either.
Price means little, except as a way to manipulate supplies and entire economies. Not a small thing for those doing the manipulating naturally. The rest of us just get pulled along for the ride.
Nor are the inflated and probably fraudulent US ‘production’ reports much to go by either. Since the goal of US production is to maintain the oily status-quo, it hardly matters if the uS ‘produces’ 1 mbpd or 7. In any event, that ‘new’ oil is low-net energy oil that produces far less bang for the buck than the oil being pulled out of Alaska during the 80s didnt. Every ‘new’ barrel’ of not-oil out of butt-end North Dakota produces less and less marginal value to the economy. And its only going to get worse. Unless someone discovers a trillion barrels of good-ole crude(not shale) under the white house lawn….
BillC on Thu, 16th Jan 2014 1:22 am
Well done.
Makati1 on Thu, 16th Jan 2014 1:47 am
That this person uses government figures is interesting. Maybe it is because he is in the ‘energy business’ and any negative energy news would be bad for his income? Like the facts that real oil is in decline in the US/World and only faux oil is growing? He is one of the many millions whose income/job will disappear in the collapse.
ghung on Thu, 16th Jan 2014 4:36 am
@ Makati1 – I suggest you search out and read some of Robert’s articles from the last few years, many still available at theoildrum.com. He’s been a pretty solid and pragmatic point of sanity on the peak oil scene. I’m sure he’ll do fine, regardless of how peak oil plays out.
RICHARD RALPH ROEHL on Thu, 16th Jan 2014 5:53 am
I predict that 2014 will be much more volatile than 2013. And the collapse of the petro-dollar will be the centerpiece.
Rapier is too timid (and $tatus quo) to see outside the collapsing paradigm.
PapaSmurf on Thu, 16th Jan 2014 6:25 am
I predict that in 2014 most Peak Oil predictions will be wrong just as most of them have been continuously for many years….
mike on Thu, 16th Jan 2014 9:13 am
You are right, PapaSmurf when you bray: “I predict that in 2014 most Peak Oil predictions will be wrong just as most of them have been continuously for many years….” Like the bloke who jumps off a high building and halfway down shouts “OK so far”.
Meld on Thu, 16th Jan 2014 9:43 am
woooop de doooo!!
Meld on Thu, 16th Jan 2014 9:49 am
I predict 2014 will be better in some respects than 2013 and worse in others. Also things will become more expensive and cheaper and people will moan less and more.
robertinget on Thu, 16th Jan 2014 2:02 pm
THe White House promised a decision
on the Northern leg of Keystone Early this year. IMO, several oil train derailments, one in Quebec in particular, strengthens safety arguments for pipelines. Doubtless increased regulations, stronger tanker cars, better track and traffic controls, tend to even up controversy.
There is no way Alberta’s oil sands production will be slowed.
Alberta will, without doubt, ship crude, even bitumen by rail to West coast ports bound for Japan, India and China. Once safety concerns are met, Alberta’s oil sands will move by rail making Keystone extension moot.
Either way my prediction for 2014 is
a giant DUH!
With three refineries in Western Canada
Exxon has lots of skin in this game.
GOOGLE (IMO)
Imperial Oil Limited (Imperial) is an integrated oil company. The Company is engaged in the exploration for, and production and sale of, crude oil and natural gas. In Canada, it is a producer of crude oil and natural gas, a petroleum refiner and a marketer of petroleum products. The Company is also a producer of petrochemicals. The Company’s operates in three segments: Upstream, Downstream and Chemical. Upstream operations include the exploration for, and production of, conventional crude oil, natural gas, synthetic oil and BITUMEN. Downstream operations consist of the transportation and refining of crude oil, blending of refined products, and the distribution and marketing of those products. Chemical operations consist of the manufacturing and marketing of various petrochemicals. The Company owns and operates four refineries. On February 26, 2013, ExxonMobil Canada acquired Celtic Exploration Ltd. (Celtic).
Makati1 on Thu, 16th Jan 2014 2:17 pm
ghung, experience in a contracting career is no guarantee of success in the future. And past performance is not indicative of the future. Not in today’s world. Anyone who uses government ‘statistics’ is not very intelligent in my book. They are obviously outright lies in most cases, published by government drones earning their next paycheck, nothing more. If they ever were reliable, it was decades ago.
Northwest Resident on Thu, 16th Jan 2014 5:15 pm
I predict that toward the end of 2014, taxes collected by the federal government will no longer be enough to pay the interest on the federal debt.
http://www.theautomaticearth.com/can-purchase-growth/
And I predict that at some exact time in the near future PapaSmurf will be sitting in front of his solar-powered television, oblivious to all factual input, watching Smurf cartoon reruns while outside the world burns down around him.
RobertRapier on Thu, 16th Jan 2014 5:47 pm
“Anyone who uses government ‘statistics’ is not very intelligent in my book.”
Anyone who thinks that’s a measure of intelligence isn’t very intelligent in my book either. I actually have first hand knowledge of how these numbers are collected. I don’t have to imagine, because I have measured the tanks and calibrated the flow meters. But if you have access to better data, please share instead of simply claiming it’s all lies. Have you been to the oil fields in Texas or North Dakota? Have you actually seen what’s going on there? I guess it’s much easier to construct a conspiracy where we are all being force-fed made up numbers when you don’t have to have any data (or direct knowledge) to actually support your claims.
As far as my income/job disappearing, I highly doubt you have the slightest idea of what I do. But I will say that people are going to demand energy like they demand food and water. Those who know how to provide it are going to be in high demand in an energy-constrained world. It’s sort of like saying that farmers will all be out of a job when food is scarce. The opposite is true IMO. I can point to a long track record of being correct about the way things were headed. Can you do the same? Can you point me to the specific predictions you have made? I know, I know — eventually you will be proven correct.
Northwest Resident on Thu, 16th Jan 2014 6:01 pm
“Anyone who uses government ‘statistics’ is not very intelligent in my book.”
Way to broad of a generalization, IMO.
Sometimes government statistics are extremely accurate and very reliable. Other times, they are fabrications or twisted half-truths and not even good enough to use as TP (i.e., Fed financial data).
I would amend Makati1’s statement to:
Anyone who uses government statistics without first verifying or having first-hand knowledge of their veracity has an agenda, is lazy, is gullible or maybe just doesn’t care — and may or may not be unintelligent.
RobertRapier on Thu, 16th Jan 2014 6:01 pm
“I predict that 2014 will be much more volatile than 2013.”
The thing about making predictions is that non-specific predictions will always be right — and wrong. You can always find supportive data by looking at a narrow enough time frame or by focusing on a specific commodity. That makes these predictions pretty useless for actually making decisions about what to do. That’s why mine are specific and measurable. If I predict that the Brent-WTI differential will narrow in 2013 relative to 2012, you don’t have to interpret whether that’s true. You simply look at the data.
RobertRapier on Thu, 16th Jan 2014 6:12 pm
“Anyone who uses government statistics without first verifying or having first-hand knowledge of their veracity has an agenda, is lazy, is gullible or maybe just doesn’t care — and may or may not be unintelligent.”
Of course government statistics can be spun or manipulated. They may give an incomplete picture of a complex story. But in the case of US oil production, anyone who denies that oil production in Texas and North Dakota has exploded doesn’t really know what’s going on. We can debate energy returns, cost of production, and how long this can continue — but expanding production is exactly why WTI prices became depressed relative to Brent.
Just imagine in 2005 that someone on The Oil Drum had claimed that US oil production was about to make a sharp reversal of direction. They would have been laughed off the site. The lesson here is that people shouldn’t be so confident they know the future. I know people who were predicting that Saudi production would be in the 6 MM bpd range by now. They just didn’t understand as much of the big picture as they thought they did. That’s the risk with making predictions. If they turn out to be way off the mark often enough, you lose credibility. If people are willing to go on record and put their name behind their predictions, they might found that it’s harder than they think.
PapaSmurf on Thu, 16th Jan 2014 7:03 pm
RobertRapier, you won’t get anywhere here.
Most of these clowns are in the fetal position. They are living in a conspiracy filled world. That mindset helps them to cope.
Northwest Resident on Thu, 16th Jan 2014 7:27 pm
I hope you stick around and continue to comment, RobertRapier. Adding another oil expert’s opinions and fact-based analyses to this site could only improve it.
So what do you think, RoberRapier? Now that we’ve got Texas and North Dakota cranking out the low-eroi shale oil, are we set to “overtake” Saudi Arabia in world oil production? Does all that shale oil coming out of environmentally lax states like Texass and North Dakota finally prove once and for all that peak oil is and always was a myth, and that we have (and will always have) oil-a-plenty to take us far into the future, with American oil production leading the way?
PapaSmurf, are you projecting again? I suppose you know all about fetal position and conspiracy filled world. I suppose that posting absurd comments like the one you just made is what helps you to “cope”.
RobertRapier on Thu, 16th Jan 2014 7:44 pm
“Does all that shale oil coming out of environmentally lax states like Texass and North Dakota finally prove once and for all that peak oil is and always was a myth, and that we have (and will always have) oil-a-plenty to take us far into the future, with American oil production leading the way?”
You don’t really know my point of view, do you? See: http://www.youtube.com/watch?v=PjOFCegjoik
RobertRapier on Thu, 16th Jan 2014 7:56 pm
“Does all that shale oil coming out of environmentally lax states like Texass and North Dakota finally prove once and for all that peak oil is and always was a myth, and that we have (and will always have) oil-a-plenty to take us far into the future, with American oil production leading the way?”
One thing it should do is give people pause who were predicting imminent peak oil in 2005, and shaking their heads at all the dummies that still thought it was going to be a few more years away. Instead of acknowledging that tight oil had indeed shifted things further out, many simply retreated to conspiracies or assured true believers that because of high depletion rates, any day now production would plummet steeply.
It should be a reminder that we have to keep an open mind about the future, and accept that things may play out differently than we think. I have always believed in handicapping different scenarios, and planning accordingly.
Northwest Resident on Thu, 16th Jan 2014 8:03 pm
RobertRapier — Your point makes sense. However, isn’t it true that in terms of conventional oil, we’ve already passed “peak conventional” oil, around 2005-or-so? From what I read, conventional oil sources are declining faster than new sources can be found. True, we have now added the shale oil and corn ethanol into the “oil” mix, which gives us a much higher total “oil” output than if we were just depending on conventional oil.
But how much further into the future do you believe shale oil and other conventional oil substitutes will carry us? I read a lot of reports that seem fairly convincing in their assessments that the shale oil phenomenon isn’t likely to get us much past the next few years. And isn’t it true that in order to produce shale/tar sands oil, we have to keep oil prices very high — much higher than what our economy can bear in the long run?
Northwest Resident on Thu, 16th Jan 2014 8:13 pm
RobertRapier — sorry, I missed your video link. Viewing/listening to it now. Verrrry interesting.
RobertRapier on Thu, 16th Jan 2014 8:17 pm
“However, isn’t it true that in terms of conventional oil, we’ve already passed “peak conventional” oil, around 2005-or-so?”
That’s probably true, but so far unconventional oil has managed to fill the gap. So when people predicted peak oil in 2005, they were thinking imminent oil shortages, not “well, technically conventional oil did peak.”
“And isn’t it true that in order to produce shale/tar sands oil, we have to keep oil prices very high — much higher than what our economy can bear in the long run?”
It depends. What can the economy really stand? If we see oil prices fall to $75 and stay there, we will see a sharp decline in shale oil production. Likewise, if oil prices are $125 we will see production continue to rise for a while. The real question is what can the economy stand? I don’t know the answer to that. I think we are adjusting to $100 oil. Europeans have been paying much higher effective prices for oil for many years, but of course a lot of that money is in the form of taxation and does stay within their economies. So what can the US stand? I don’t know, but as oil prices remain high people will respond to those high prices in ways that will reduce individual oil consumption.
That’s not a long-term solution, but it gets us a few years further down the road than many in the early peak camp imagined.
Northwest Resident on Thu, 16th Jan 2014 8:34 pm
Thanks RobertRapier for your answers. I just completed listening to your posted video — should have done that before I started hitting you with questions, but hey, I’m at work trying to get a website developed, trying to keep two high-information highways buzzing at the same time.
From what I can tell, “peak oil” has always been a fairly relative term — in never did have an exact definition with measurable and precise definitions. It was and is a concept, more than a crystal-clear point in time. I guess there are a few ways to define “peak oil”, depending on who you’re talking to.
I didn’t hear anything in your video presentation that I disagreed with, in fact, I guess everything you’re stating as fact I have already come to the conclusion IS fact. EXCEPT — the part about being able to make jet fuel out of wood chips with very minimal fossil fuel input — never heard THAT before. Top secret project, I’m sure.
I believe the theme in your video presentation is that peak oil or not, our world is rapidly running out of fossil fuel energy and we need to adjust our civilization to deal with that reality.
Maybe where we might disagree is on this point. I do not believe that we CAN adjust the world economy to operate on LESS fossil fuel input. I believe that we are in an economy that either grows or it dies — due, of course, to the fact that all “growth” has always been dependent on credit/debt, and that credit/debt has always been premised in large part on the assumption that we’ll have plenty of cheap (enough) oil energy to produce growth to pay off that credit/debt and still leave enough of a margin for profit. I believe that we are at that point of time where growth has stopped — other than “government statistics” which show growth, but which are totally unbelievable and are contrived data if ever that was any. You seem to think there is a prolonged “depression” ahead of us due to this situation, which I believe you recognize. I believe that there will be a freezing up and total stoppage of trade and economy in the world once credit dries up and we all realize that the trillions in debt cannot and will not ever be paid.
I visit this site often, and I consider you an expert on one of the subjects I am most interested in. I hope you’ll continue to visit here, and post your opinions and “takes” on the many various articles posted. Thanks!
RobertRapier on Thu, 16th Jan 2014 8:38 pm
“EXCEPT — the part about being able to make jet fuel out of wood chips with very minimal fossil fuel input — never heard THAT before.”
Minimal fossil fuel input because you burn part of the input for fuel — but an expensive process. It’s one of those things where you go “OK, here’s another way we can produce fuel at a high enough price.” Of course to do that with sustainably-sourced biomass means you can displace only a tiny fraction of today’s oil consumption; definitely less than 10%.
Makati1 on Fri, 17th Jan 2014 1:27 am
And it is all moot when the economy collapses soon …
When you read any article look at it source and who signs the paycheck of the author. THAT will give you the spin.
And, even a doctorate is no guarantee of intelligence …
PapaSmurf on Fri, 17th Jan 2014 1:49 am
“And, even a doctorate is no guarantee of intelligence …”
—————–
Yeah, because internet guys like Makati1 have so much more credibility on these topics.
Makati1 on Fri, 17th Jan 2014 6:02 am
Papa, you need to get out more … and use that PC to get educated on current events outside your little box. A PHd can be bought just like any other commodity today. Intelligence is more rare. And common sense practically is extinct in Western society.
RobertRapier on Fri, 17th Jan 2014 4:06 pm
“When you read any article look at it source and who signs the paycheck of the author. THAT will give you the spin.”
And if you don’t actually know who signs the paycheck, you can make up anything you want and give it any spin you want.
Isn’t it fun and easy to cast aspersions anonymously on the Internet? No consequences, no accountability. You could even do it as a vested interest yourself, and nobody will ever know. See what I did there? 😉