Comments on: Jett Rink’s Speedboat

By: Matthew

Matthew — Fri, 11 Sep 2009 03:25:16 +0000

Oops. “Should not* be done in so piecemeal a manor.”

By: Matthew

Matthew — Fri, 11 Sep 2009 03:24:22 +0000

Your commentary is insightful and useful, but I think you've overlooked a comparison or two, maybe in the cause of brevity. The comparison of capital costs should be done in so piecemeal a manor. It is true that a pack mule costs less than a helicopter, but the relevant comparison is not in nominal terms but in real ones. A billion dollar platform represents a certain percentage of the world's energy budget today, how much of the energy budget was represented by building a railroad to East Texas in 1900?

Maybe you could link some of the CERA data and discuss how you feel it reflects different capital constraints across time.

By: Matthew

Matthew — Fri, 11 Sep 2009 00:25:16 +0000

Oops. “Should not* be done in so piecemeal a manor.”

By: Matthew

Matthew — Fri, 11 Sep 2009 00:24:22 +0000

Maybe you could link some of the CERA data and discuss how you feel it reflects different capital constraints across time.

By: gregor.us

gregor.us — Thu, 10 Sep 2009 15:34:09 +0000

Yes to the principle of forward discounting behavior in markets. But, no (imo) to the idea that the global oil market in this particular example will respond to supply of even 500 thousands barrels of new oil per day coming on line in 2014-2016 in a world where current depletion rates are already at 6.0% or more. i.e. we already know that the world has to bring on new supply in the amount of a single Iran (4 Mb/day) each just to replace existing decline--before we even get to the task of increasing production.

Or, to answer more narrowly, given that volatility in oil prices is nearly always about short term--not long term- supply and demand, then we can assume that will remain.

FWIW: I personally believe that to run a pricing market for a non-renewable resource off rationing short-term supply and demand makes no sense. But that's just me.

G

By: ericgarland

ericgarland — Thu, 10 Sep 2009 15:19:51 +0000

"because the market would understand that 'supply was on the way.'"

So the market would be reacting because the market would understand that something might happen in the future.

Isn't the market supposed to react to actual changes? Or is it now an entirely hallucinatory process? If the market begins to dream, then things happen. Help me if I am missing something.

By: gregor.us

gregor.us — Thu, 10 Sep 2009 13:04:03 +0000

I should do a round-up of some of the most ridiculous commentary on this find, and last year's Jack Field discovery.

By: gregor.us

gregor.us — Thu, 10 Sep 2009 13:01:40 +0000

Steven Schork on TV actually said this ultra-deepwater oil would dampen the volatilty of oil prices in the future, because the market would understand that “supply was on the way.”

http://www.bloomberg.com/apps/news?pid=newsarch...

By: steveplace

steveplace — Thu, 10 Sep 2009 11:15:52 +0000

How about a bumper sticker panacea:

“Odds are, you don't know what you're talking about.”

By: Steve

Steve — Thu, 10 Sep 2009 11:15:48 +0000

I thought the BP release about Tiber was hysterical. What other industry can realease a statement essentially saying “We've got this great new product we'd like to announce. It's going to cost a fortune to make, and the technical challenges will be immense. The endeavor would almost certainly bankrupt a smaller company. And if we're really really lucky, we'll begin selling this product in about 7 years.” – and get rewarded? If any other type of business put this stuff out they'd be deservedly mocked.