Why Energy-Economy Models Produce Overly Optimistic Indications
Below are the slides I used, and a little explanation. A PDF of my presentation can be downloaded at this link: The Mirror Image Problem.
Slide 1
FCAS stands for “Fellow of the Casualty Actuarial Society”; MAAA stands for “Member of the American Academy of Actuaries.” Actuaries tend not to be interested in academic degrees.
Slide 2
I try to explain how a more complex situation can be hidden in plain sight.
Slide 3
It is not obvious that both the needs of energy producers and energy consumers should be considered.
Slide 4
If we look back at what the discussions of the time were, we can see when remarks were that prices were too high for consumers, and when they were too low for producers. See for example my article, Oil Supply Limits and the Continuing Financial Crisis and my post, Beginning of the End? Oil Companies Cut Back on Spending. This latter article shows that companies were already cutting back on spending in 2013, when prices appeared to be high, because even at a $100+ per barrel level, they still were not high enough for producers.
Slide 5
Oil companies tend to extract the cheapest and easiest to extract oil first. Eventually, they find that they need to move on to more expensive to extract fields–even with technology enhancements, costs are rising.
…click on the above link to read the rest of the article…
