A guy who has been wrong on oil prices longer than most has managed to convince the New York Times to give him some of their precious op-ed space to issue yet another sure-to-be-wrong prediction. That would be energy consultant Michael Lynch, with his remarkably content-free piece, ” ‘Peak Oil’ Is a Waste of Energy,” asserting:
Oil remains abundant, and the price will likely come down closer to the historical level of $30 a barrel as new supplies come forward….
Here’s my bet to Lynch. Let’s take the average price of oil from 2010 to 2015. For every $1 a barrel it is below $40, I’ll pay you $200, if you pay me a mere $100 for every $1 a barrel it is above $40.
That should be a no-brainer since I am giving him 2-to-1 and spotting him $10 a barrel off of what he says the right price is.
I wasn’t going to post on this since I have blogged endlessly on the painfully obvious reality that we are at or near the peak (see “Peak Oil? Bring it on!“). It is so obvious that the International Energy Agency, which until recently had been a bastion of relatively staid and conservative and hence useless energy prognostication, has begun desperately trying to warn people of what is happening — see World’s top energy economist warns peak oil threatens recovery, urges immediate action: “We have to leave oil before oil leaves us.” Heck, half of the most cautious “show me the money” people in the entire energy business agree (see “Half of oil & gas CFOs say we are peaking“).
But one of the congressional staffers who reads this blog sent me something I didn’t know existed — an online transcript of a 1996 Congressional hearing “U.S. energy outlook and implications for energy R&D : hearing before the Subcommittee on Energy and Environment of the Committee on Science, U.S. House of Representatives, One Hundred Fourth Congress, second session, March 14, 1996” (hard to read HTML here, massive PDF here). I was Acting Principal Deputy Assistant Secretary, at DOE’s Office of Energy Efficiency and Renewable Energy, and the House GOP were basically putting me on trial for
- Predicting that oil prices were going to rise in the future because of our growing reliance on oil from unstable regions and
- Using that as an argument for why we needed to dramatically increase funding for clean energy R&D.
That prediction and argument were published at length the next month in my Atlantic Monthly piece (coauthored with Deputy Secretary Charles Curtis), “Mideast oil forever: Congressional budget-cutters threaten to end America’s leadership in new energy technologies that could generate hundreds of thousands of high-wage jobs, reduce damage to the environment, and limit our costly, dangerous dependency on oil from the unstable Persian Gulf region” (see also here).
And who did the Republicans drag in as their witness to rebut me — one “Michael C. Lynch, Research Affiliate, Center for International Studies, Massachusetts Institute of Technology.” Even back then, in the good old days of $17 oil (1995 average nominal price or $24 in 2008 inflation-adjusted dollars), Lynch was predicting flat oil prices for decades:
In previous work, I have shown that past oil market forecasts were biased towards rising prices and declining non-OPEC production. Correcting for the supply pessimism leaves a forecast in which oil markets remain in surplus over the long-term, suggesting that oil prices will remain weak for the indefinite future….
Conclusions: Prices are much more likely to be weak than strong….
… the ongoing technological revolution in the industry, combined with managerial improvements and a more friendly fiscal environment in oil exporting countries, will keep real oil prices flat for the next two decades.
… a flat oil price forecast appears to be much more consistent with historical behavior than the rising price forecasts of DOE and the lEA. A declining price, or flat at a lower level, would hardly be unrealistic.
Not clear how an energy consultant can keep making the same predictions with his track record. Not clear just how wrong your past predictions have to be before the NYT won’t publish your op-ed where you repeat the same exact wrong predictions.
For the record, here is in fact what happened in the decade after Lynch’s prediction of flat real prices:
Real prices more than double in the subsequent decade.
Lynch’s analytical worldview is that “a flat oil price forecast appears to be much more consistent with historical behavior.” Well, the future is just like the past, until, of course, it isn’t. We aren’t making more oil, we are, however, consuming more and more.
For completeness sake, and with apologies to my regular readers, as Dr. Fatih Birol, the chief economist at the International Energy Agency (IEA) recently explained:
Dr. Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.
The IEA’s work makes clear that for oil to stay significantly below $200 a barrel (and U.S. gasoline to be significantly below $5 a gallon) by 2020 would take a miracle “” or rather 6 miracles see “Science/IEA: World oil crunch looming? Not if we can find six Saudi Arabias!” See also “Merrill: Non-OPEC production has likely peaked, oil output could fall by 30 million bpd by 2015,” which noted,
Steep falls in oil production means the world now needed to replace an amount of oil output equivalent to Saudi Arabia’s production every two years, Merrill Lynch said in a research report.
So how about that bet? Michael Lynch? Anyone?
One final note: The conservatives in Congress thwarted efforts to ramp up clean energy R&D in the 1990s, and the situation has become so dire now, that increased R&D, while useful, is quite secondary to the urgent need to massively deploy clean energy technology, as Obama and Congress have done in the stimulus and the major fuel economy deal earlier this year, and as they hope to do in the climate and clean energy bill.