There is nothing quite like a story or a myth to evoke emotional responses from humans. A loose definition of a myth is that is may or may not be true so, in other words, a myth could contain elements of truth or could be completely bereft of any. Setting aside ancient myths and folklore, they are actually all around us in our modern day lives. Most of these have been created by marketers who are seeking to tap into your inner psyche and make you believe you cannot live without their service or product. Should the myth succeed in making you believe this then we are buying into a set of rules without questioning them; effectively buying into something that we recoil in horror from when they are being laid down by the powers that be. As the title suggests, this piece is actually about the myths we are being fed in regards to oil. How much truth, if any, exists in any of these stories is not for us to say as we know as much as you. But we thought we would try and take a closer look at them.
Myth -People are no longer interested in driving
Our View- So, sales of all manner of vehicles are booming around the globe but the good people of Pakistan don’t want to drive. Now, surely the spin maestro who released this ludicrous statement expects us to believe that the entire world is out of kilter with our country rather than the other way around? Sales of new gas guzzlers are at an all time yet they are trying to convince us that all the reports of these online and in the news are the actual myths.
Myth- The world is going to run out of oil
Our View- So what they are effectively saying that the bronze age came to an end as we ran out of bronze etc; lets look at some proven stats shall we? Within New Mexico and Texas is more recoverable gas and oil than in several Saudi Arabias. That’s a helluva lot of gas and oil and that, along with other known reserves that have so far gone untapped, we have more than enough to last way beyond anyone’s lifetime who is currently on this planet, and several generations of their offspring. As, by this time, we can pretty much predict that energy will be a very different landscape from what we currently have, why on earth is something being fed to the media that won’t have any bearing for hundreds or even thousands of years. It is actually more likely that rather than oil running out, it will become a redundant energy source thanks to all the alternatives that are already emerging. We can only presume the person who came up with this one was having a bad day at the office and had to come up with something quickly.
Myth- We can predict oil prices for years to come
Our View- This is about as realistic as being able to predict the weather for the next year or so. There is no predictability in oil prices as collapses and sharp hikes can come from nowhere. The 70% drop in Saudi wasn’t in anyway intentional but it happened due to supply increasing by a mere 1%. Oil price behaviours are incredibly sensitive and can be affected by all manner of outside factors so no, we can NOT predict oil prices for years to come.
Myth- Goldman Sachs have their finger on the pulse of the industry
Our View- Anyone who can be bothered to look back over their past record known how far this is from the truth. They have been the company everyone looks to for way too long now as they are notorious for getting it wrong when forecasting both tops and bottoms. What they excel at, however, is jumping on an already rolling bandwagon and stoking the fires of contention. They always seem to be forecasting through a back window and never fail in overdoing their calls on peaks and troughs. Have a look for yourself what happened back in 2008 when they were calling to Morgan Stanley for $150 and $200 oil, weeks before it plummeted to $40. There are plenty of other instances you can look up online if you want convincing of this myth.
Myth- We are running out of storage space for crude oil
Our View- No we’re not! Yes, the volume has increased in recent years, especially at Cushing, the oft mentioned storage facility which is always referred to when this myth gets another airing. However, Cushing actually only accounts for around 10% of the crude oil storage in the US. The reason for this is that the volume in other storage areas has increased but not as much so the media trolls seem to kind of forget they exist. Another misconception is that Cushing is akin to a cul de sac as in being a dead end with nowhere else for the crude to go. There are, in fact, huge pipelines connecting it to the Gulf Coast where there is plentiful storage that is nowhere near even half its capacity. Additionally, as the warm weather approaches large withdrawals will be getting made on inventories so the volume will drop further, so this myth should go away for a few months but will no doubt rear it’s ugly head again later in the year.