Here's the transcript from the call with Coxe this week, which focuses on oil. I think it's well worth it for energy-focused investors:
Message 22087048
Here is an excerpt:
So what we should have at this point is miniscule prices for oil and natural gas and we're not getting them and meanwhile we're heading into the season where the oil refiners are going to have to be doing a lot of maintenance work which they kept on postponing because of the Katrina crisis situation. And as we found out from the disaster at the Galveston operations at BP, the industry hasn't been as good as it might have been because prices were so high and is was something that you could put off and that can lead to further troubles.
So what we have is a changed situation in the hydrocarbon outlook, much more negative. And if we needed any confirmation on that, I was watching CNBC and Daniel Yergin himself appeared on it. I've not seen him before, but he is the most articulate expert out there about the idea that oil prices should never have gone above $50, that it's all idle speculation. There's lots and lots of oil and prices are going to fall back into the 30's and he's able to charge thousands and thousands of dollars for his reports that demonstrate this.
Now you've heard me talk of him before with respect but in disagreeing with him because what he does is, I would say is, he takes the best case scenario. He takes all the OPEC countries forecasts for how much they're going to produce and he assumes that there will be no real decline rate of any great magnitude in the rest of the world and takes a rather cautious view of the increase in demand from China and India and so as a result of that what he has is a situation of great oversupply of oil starting late this year and continuing for several years.
As a matter of fact, he's got a lot of client work with OPEC and when you see the kinds of arguments that come out publicly among OPEC members about the need maybe to cut back on production, it always seems to come out after a Daniel Yergin report which indicated that there's lots of this stuff out there. Anyway, he was being interviewed and he talked about Nigeria and Iran and in response to a question, "Well, does that mean that oil prices can go back up above $70," and he says, "Well, if the situation continues, certainly."
Now this has been a man who's been, I think, for some time needing to have a way to get off from an extremely bad call. Traders know that if you're long and wrong you have to get off the position fast. And forecasters - and of course I'm one of them - it's very difficult to get off a bad call. And what you seek is some sort of deus ex machine, an event which people hadn't forecast but you can say, "Ah, well, nobody could have predicted that and so therefore I would have been right if that hadn't happened and therefore I change my call." And you hope that you can run that by an incautious audience and not look too badly about the fact that you've done a 180 degree turn on a bad call. So without ascribing to the distinguished Daniel any false motivation here, it's quite clear the situation has changed for the worst. |
