Tuesday, August 23, 2005

Econbrowser: Limitations of the Hirsch report on peak oil:
Basically, if Hirsch is right, he would be able to turn himself a handsome millionaire by buying oil, or oil futures, or oil options, before that rapid price increase. That opportunity would be available not just to Hirsch and his two co-authors, but also to all their cousins, and my nephews, and all the people in China, to take a few examples. For Hirsch's vision to be accurate, none of those people, not one of us, is going to be clever enough to take our profits. Because if we did, that of course would cause the price of oil to rise well before we get to the peak, and people would begin making all the adjustments that Hirsch wants to discuss, on their own, without needing any good instructions or advice from him.

And good instructions and advice he has plenty of-- what kind of engines to put in our cars, which energy sources to be developing, all with a dramatic and forceful timetable spelling out exactly when we need to do all this. He's quite certain that nobody will act on those implications of his analysis that could make anyone who follows them quite rich, but at the same time hopes that we we will believe in his analysis sufficiently to want to implement policies that would render those who are forced to follow them unambiguously poorer.

Now that's an interesting model of human behavior.

I just checked the wayback machine for the NYMEX Crude Oil Futures Quotes and Market Prices. Back in July 2003, they were predicting oil was going to cost $23 a barrel in August of this year. What I don't understand is why Hirsch didn't recommend buying oil futures back then. He would have gotten pretty rich.


Anonymous Anonymous said...

Whomever came up with the idea for a day trading futures was a genius!

3:49 PM  

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