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Countdown to $100 oil (38) - Who gets Champagne edition

by Jerome a Paris Thu Jan 4th, 2007 at 05:29:27 PM EST

Time to say who won the bottle of champagne I promised at the beginning of last yeat to who would provide the best forecast of the oil price at the end of 2006.

One thing is certain: it's not me!

My own bet:

Highest: 240$/bl, after a US bombing raid on Iranian nuclear facilities, in October
Year-end 90$/bl
Natgas highest: 25$/mbtu after a cold spell in March. Year-end: 17$/mbtu
100$/bl oil reached in October

Wrong, wrong, wrong, wrong!

End of year prices were:

Dated Brent: 59.80
WTI Cushing: 61.05

Oil prices end 2006 where they started

WASHINGTON (AP) - Oil prices settled above $61 a barrel Friday to finish 2006 roughly where they began, marking another tough year for energy consumers and another stellar one for the petroleum industry. It was the fifth straight year in which oil prices were higher than the year before, on average.

On Friday, light sweet crude for January delivery rose 52 cents to settle at $61.05 a barrel on the New York Mercantile Exchange, up a penny from where they ended last year.

Nymex oil futures peaked at $78.40 on July 14, but averaged $66.25 for the year, compared with $56.70 in 2005 and $41.47 in 2004.

The price of natural gas plummeted by almost 41 percent from start to finish in 2006 thanks in large part to mild weather and bulging U.S. inventories, but remained high by historical standards. For the year, natural gas futures averaged $6.98 per 1,000 cubic feet, or 23 percent below the 2005 average of $9.01.

Natural gas futures settled Friday at $6.299 per 1,000 cubic feet.

So we're still in a long term upwards trend, but with a sharp drop in the last third of the year that cancelled the steady gains of the first part of the year, and the year ended a wash. The short term trend is still down, especially with the current mild winter we enjoy.

But, despite the Lebanon crisis, there was no big geopolitical crisis, no major supply incident (there were several smaller ones, though) and no visible shortfall in oil nor gas.

So the gloomiest predicitions, like mine, did not come to pass and were, to say the least, wrong.

I'll be back with new predictions for 2007 in a forthcoming diary, but my credibility there will not be so great - at least with respect to short term price bets. I hope that what I write on the long term trends still makes sense, but contrarians and critics are free to make themselves known in the thread!

As regards who won the bet from the initial betting threads in late 2005, it's a close call between londanium who bet $62 for Brent ($2.15 too high), and wchurchill who bet $58 for WTI ($2.05 too low), both on the eurotrib thread.

The second betting thread in late November this year provided a lot of answers which were at least in the correct ballpark (but that's less surprising with one month to go), and the closest bet was histopresto on DailyKos at $61.01 for WTI, almost a bullseye.

So it is my pleasure to announce that the 2006 winner of the bottle of champagne is wchurchill

Second prizes go to londanium and histopresto

Please contact me by email to organize delivery.

Countdown to $100 oil (37) - OPEC says peak oil (and $100 oil) is near
Countdown to $100 oil (36) - Free game! win champagne! no risk! (eurotrib)
Countdown to $100 oil (36) - Free game! win champagne! no risk! (DailyKos)
Countdown to $100 oil (35) - peak oil: the last skeptics capitulate (CERA)
Countdown to $100 oil (34) - Oil major CEO calls for demand reduction
Countdown to $100 oil (33) - Below zero
Countdown to $100 oil (32) - peak oil is, like, so over. Not!
Countdown to $100 oil (31) - $15 oil? The cornucopians are fighting back
Countdown to $100 oil (30) - senior politico fears looming oil wars
Countdown to $100 oil (29) - Alaska joins axis of evil (unreliable oil suppliers)
Countdown to $100 oil (28) - New records suggest more to come
Countdown to $100 oil (27) - 'Mission Accomplished' - High oil prices are here to stay
Countdown to $100 oil (26) - Time to bet again (eurotrib)
Countdown to $100 oil (26) - Time to bet again (dKos)
Countdown to $100 oil (25) - Iran vows that oil prices will not go down
Countdown to $100 oil (24) - What markets are telling us about future energy prices
Countdown to $100 oil (23) - Running out of natural gas in North America
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to $100 oil (21A) - The 4 biggest oil fields in the world are in decline *
Countdown to 100$ oil (21bis) - long term vs short term worries (dKos)
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006 (Eurotrib)
Countdown to 100$ oil (19) - Your bets for 2006 (DailyKos)
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets (eurotrib)
Countdown to 100$ oil (9) - I am taking bets (dKos)
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1) (eurotrib)
Countdown to 100$ oil (1) (dKos)

* added to the series after the fact

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Jan 4th, 2007 at 05:32:46 PM EST
I was toying in my mind (after all the economic input recently) with an ET Energy fund collaboratively managed. Then  I thought 'Naah, no-one will ever agree and we'll all hate each other'.

The results of the champers contest have further dampened my enthusiasm for collaboration. I think I'll just go with wchurchill on everything ;-)

You can't be me, I'm taken

by Sven Triloqvist on Thu Jan 4th, 2007 at 05:39:35 PM EST
That would be no fun!  I learn a lot from your perspectives, as do others.

(I know your comment is in jest, but it give me a chance to say this.)

by wchurchill on Fri Jan 5th, 2007 at 10:44:14 AM EST
[ Parent ]
Some of the latest debates have been fascinating, and I am sure that dissenting or altermative viewpoints play a big part in making them lively and well-argued.

The fact that our debates can include a variety of views - even from opposite poles - and still remain civil, gives me hope.

My impression is that last year you got a lot of strife from being a heretic (my favourite kind of person) and there was a period when you disappeared. Your contributions recently, imo, have been important to raising the level of debate. So - good to have you here ;-)

You can't be me, I'm taken

by Sven Triloqvist on Fri Jan 5th, 2007 at 11:04:44 AM EST
[ Parent ]
Yes, but who will be able to guess the going price for a bottle of Champagne next year? That's the real question!

Those who can make you believe absurdities can make you commit atrocities. -Voltaire
by p------- on Thu Jan 4th, 2007 at 06:51:16 PM EST
And will there be a barrel of oil for the winner...?
by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jan 4th, 2007 at 07:00:01 PM EST
[ Parent ]
ugh.  keep it.  42 gallons of stinky sludge that qualifies as hazardous material is no prize!  Stick to the bubbly!
by HiD on Thu Jan 4th, 2007 at 10:04:01 PM EST
[ Parent ]
Ah, but imagine how valuable gallons of that toxic sludge will be in our post-peak-oil-apocalyptic future-world!

I can't really see Jerome interested Champagne futures though (even if he is French).  Just the idea that he's arranging delivery of the stuff makes me chuckle.

<<so very serious>>

Those who can make you believe absurdities can make you commit atrocities. -Voltaire

by p------- on Thu Jan 4th, 2007 at 10:47:30 PM EST
[ Parent ]
no value at all since we're all dead.  at least according to the Kunstler apocalyptos.

Not to mention a home refinery is a bit of a pig.  Which is of course why people invented futures so that speculators could capture the money without touching the underlying commod.  Not that that works all the time.  This year the GSCI lost something like 20% even though it is 60%+ oil and oil was unchanged.  Paying to roll month by month ate them alive.

by HiD on Fri Jan 5th, 2007 at 04:15:19 AM EST
[ Parent ]



wchurchill: I have a diary to write about people who have $100,000 dollars to invest.  But I would seriously recommend contacting Chris Cook re: what noble uses could be made of large spare change.

I have an album to produce, and it won't sell even one small copy!  Who's gonna invest?

But yes!  And so...wchurchill..the tao of the tao calls...

(randomly chosen, of course)

...but I couldn't find my translation of the Tao Te Ching...

and then I thought: how about the I Ching?

Yes!  Of course!

Here we go...

I threw (for you)...

51 - Chen / The Arousing (Shock, Thunder)


SHOCK brings success.
Shock comes--oh, oh!
Laughing words--ha, ha!
The shock terrifies for a hundred miles,
And he does not let fall the sacrificial spoon and chalice

But what does it mean?

The shock that comes from the manifestation of God within the depths of the earth makes man afraid, but this fear of God is good, for joy and merriment can follow upon it.

[Luckily God doesn't exist]

[Hold on.  Joy and merriment?]

When a man or woman has learned within his or her  heart what fear and trembling mean, he or she is safeguarded against any terror produced by outside influence.  Let the thunder roll and spread terror a hundred miles around; he or she remains so composed and reverent in spirit that the sacrificial rite is not interupted.  This is the spirit that must animate leaders and rulers of men--a profound inner seriousness from which all outer terrors glance off harmelessly.

And the image...

Thunder repeated: the image of SHOCK
Thus in fear and trembling
The superior man sets his life in order
And examines himself

If only!

(Not moving lines.)

Tell me if I'm way off line!

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Thu Jan 4th, 2007 at 08:45:34 PM EST
The I Ching is a powerful, sometimes almost scarily so, text.  Just to add the Wilhelm version of the interpretation of the image:
The shock of continuing thunder brings fear and trembling. The superior man is always filled with reverence at the manifestation of God; he sets his life in order and searches his heart, lest it harbor any secret opposition to the will of God. Thus reverence is the foundation of true culture.
I certainly don't view myself as the "superior man", but the "sets his life in order and searches his heart,,,,," part of this is a major life objective for me now--and I'm not claiming success, only pointing out effort.

I'm trying to read every morning at least a chapter of a wonderful book by Thomas Merton, "New Seeds of Contemplation".  Yesterday's reading was Chapter 25, Humility against Despair, and the closing paragraphs were:

A humble man can do great things with an uncommon perfection because he is no longer concerned about incidentals, like his own interests and his own reputation, and therefore he no longer needs to waste his efforts in defending them.

For a humble man is not afraid of failure.  In fact, he is not afraid of anthing, even of himself, since perfect humility implies perfect confidence in the power of God, before Whom no other power has any meaning and for Whom there is no such thing as an obstacle.

Humility is the surest sign of strength.

I was struck with the connection from the I Ching, "searches his heart, lest it harbor any secret opposition to the will of God",,,,,and Merton, "perfect confidence in the power of God, before Whom no other power has any meaning".

In the past I've thrown the I Ching regarding certain questions I might be grappling with in life, and have frequently been stunned with the relevance of the answer.  But it's interesting to see the relevance even when some one else throws it with you in mind.  Scary.

Please note these readings are thoughts for improvement in life,,,,,and in no way do I mean to imply that I am the "superior man", or have the humility described,,,,,I wish, but it's far from it.

PS: I'm sure Chris would have some great ideas for "spare change", but right now I have more than enough good causes for my meagre resources.

by wchurchill on Fri Jan 5th, 2007 at 11:40:23 AM EST
[ Parent ]
But it's interesting to see the relevance even when some one else throws it with you in mind.  Scary.


Did you see this diary?

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Fri Jan 5th, 2007 at 11:54:24 AM EST
[ Parent ]
I guess I should have made my guess for Jan 5!

2006 WAGs (wild ass guesses)  All front month WTI on the day.

1)  Highest touch on WTI at any point intra day
$ 77.75.  Iraq civil war stops exports and sets oil world on edge.

   2.  Year end $55.00

   3.  Year High  $14.5, year end  $9.00.  

Both Henry Hub in normal units.  Nat gas will slump in 2006 as drilling will go wild, Hedges for petchem and fertilizer guys will be gone so production will slump and therefore demand for nat gas drop.  Ditto electricity generation.  nat gas turbines aren't economic at these prices so demand will wane.

Peak   $78.4 vs $77.75.  Not a bad guess.

reasoning was off.  I'd blame the peak more on general mid east tension rather than the Iraq civil war.

Year end -- $55 vs $61.05.  My guess looking a whole lot better today with the close at $55.6.  But even here in the last time zone of consequence, it's not Dec 31 anymore.

Nat gas -- $9 vs $6.3.  Even my optimism re price drops was insufficient.  If anyone had told me we'd see the 4's this fall I'd have laughed.  Just shows you how volatile these markets can be.

The Dec 31 target date is a bit of a wildcard to boot.  Trade really shuts down between Xmas and New Year so odd things can happen.  Witness last year when on Dec 27 we were about $57.5 and ended up at $61.04.  It's a thin, volatile period.  

If you do run the game again, perhaps shift the date to the annual average or a high/low for the year.  Not that any of this really matters.

by HiD on Thu Jan 4th, 2007 at 10:02:33 PM EST
Ahh, what a nice surprise, after not being able to get to the site for a while, to read down the diaries and posts and find out about winning the contest.  Thank you Jerome.

Obviously there is more than a fair amount of luck in these things.  Winning by a dime on a $60 right answer is winning by 0.17%, obviously a photo finish.  And then as HiD points out, there has been quite a bit of volatility the last week+, and different closing dates would have given different winners.  I'm happy to have just been in the ball park.  

I did enjoy the idea of the contest, because it does bring us back to our predictions and discussions, after the time has passed and the facts have materialized.  There wil always be some luck in even being close, much less winning, because who knows what world events will happen between the bet and the close.  But still, since we do a lot of theorizing and predicting, it's fun to see how those predictions play out.

by wchurchill on Fri Jan 5th, 2007 at 10:28:17 AM EST

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