The us bet big on american oil and now the whole global economy is paying the price — quartz

The analysts defend themselves by noting that they got this and that aspect of oil’s trajectory right, which is fair enough. Gas dryer vs electric dryer cost savings But it seems all missed the big picture: First, they failed to see that from 2011 to 2014, a surge in shale oil production was going to become a big factor in global supplies; then, they did not anticipate that the same oil would create the mayhem before us now. Year 6 electricity worksheets In fact, in the case of the current turmoil, most forecast the precise opposite—economic nirvana. Gas up yr hearse Interviews with the main institutions that made the bad calls reveal no crisis of confidence, and they are busy putting out analyses of the latest developments.

We live in a time of bad forecasting of all types. Gas monkey monster truck Examples include the failed predictions of political pollsters gauging a host of critical elections around the globe, and the delusionary thinking that led to the last American economic catastrophe wreaked on the world—the 2008 mortgage crisis. Gas mileage comparison It’s hard to predict events, as Philip Tetlock described last year (paywall) in his book Superforecasting.

Consumers have been big winners—gasoline prices have plummeted. Gas definition wikipedia That part has happened. Done with electricity tattoo book But analysts failed to anticipate that the Saudis would refuse to cooperate with the shale gale, as it’s been dubbed, and in fact would declare war on it, even though Riyadh did precisely the same thing in the 1980s. 1 unit electricity price india The analysts did not foretell that, if shale oil production rose as they projected, it could drive down prices not only to the $80-a-barrel average that many forecast, but much lower—so low, for so long (see chart below), that companies would put on hold $380 billion (and counting) in oil and natural gas field investment, and fire 250,000 industry workers around the world last year (including around 90,000 in the US).

In the bigger picture, none took account of the emerging markets’ addiction to investment from OPEC, whose billions of dollars today are either being withdrawn or simply no longer sent. Electricity distribution map This, along with an evaporation of recycled petrodollars from Europe, is consigning those emerging nations to recession, as reported first by Izabella Kaminska and her Financial Times colleagues.

“Unfortunately, we are all slaves to history,” said Robin Mann, an energy analyst with Deloitte. Gaston yla agrupacion santa fe 2016 “We kind of fall back to what historically has happened.” What is that history?

Since the 1970s, OPEC, the Saudi-led oil cartel, has governed oil prices by artificially restricting production in its members’ oilfields; there was never a global shortage, but OPEC’s market behavior created the illusion of one. E electricity bill Petroleum production in the US—once the world’s largest supplier—peaked in 1971 (see chart below), and it went on a slow decline, resulting in higher and higher imports, and an evolving shortage of natural gas, too. Electricity worksheets grade 9 By 2008, the industry mantra was that cheap oil and gas were history; the only question was how high oil prices could go. Electricity physics pdf (AEI)

As an illustration of OPEC’s power, in the mid-1980s, Saudi Arabia became fed up with losing market share—its production dropped to as low as 3 million barrels a day (compared with 10.5 million today). Electricity and magnetism study guide 5th grade So it flooded the market with oil, driving down the price to as low as $13 a barrel. Gas line jobs in wv In the process, a number of rivals were crushed, most harshly the Soviet Union, which collapsed entirely. Electricity worksheets But the Saudis recovered their market share.

By the early 2000s, oil demand from China, India, and elsewhere began to exceed supply—conditions for the so-called “superspike,” the famous rise of commodity prices—and oil’s long climb over $100 a barrel began.

Then, unpredicted and seemingly overnight, starting in the late 2000s, the US went from natural gas shortage to an enormous, 100-year overhang of the fuel. A gas has no volume And there was a surge in US oil production that reached 4.4 million barrels a day by 2015. Electricity off peak hours At once, the US was challenging the 1971 oil production peak.

One of the specific industries to gain from the boom would be steel, forecast Deloitte, the consulting firm, in a 2014 report. Gas variables pogil extension questions Given the expected demand from the oil industry as it built out its infrastructure, American steel companies could now compete head to head with rivals including China, despite the latter’s lower labor costs.

Adding to the growing glee, another major consulting firm, PwC, said that not only would shale be a big bonanza for the US, but it would drive a full percentage point increase in global GDP by 2016, and an extra 2.3% to 3.7% by 2032 (see chart below). R gas constant chemistry In February 2013 (pdf), the firm did warn drillers that they should prepare for lower oil prices. Gas in babies treatment But how low? If fracking spread around the world and began to produce 14 million barrels of oil a day—PwC’s estimate of the potential by 2035—oil prices would drop as low as $83 a barrel, the firm said. Electricity 101 powerpoint (PwC)

Such studies, often paid for by the industry, accompanied forceful oil company lobbying to open more federal land to shale drilling, to forestall federal regulation of fracking, and to lift a ban on oil exports. Electricity cost las vegas The first two of those efforts—to open up more land, and to stop federal regulation—failed. Gas zauberberg But oil exports were eventually legalized.

On the shale patch itself, the politics were decidedly pro-fracking. Electricity in water pipes When the Texas city of Denton voted to bar fracking within municipal limits, the industry came down hard, with the help of state politicians: the Texas legislature overturned the move by barring towns from regulating oil and gas drilling. Electricity distribution network Signing the bill, governor Greg Abbott said he was acting in the interest of “protecting private property rights.” That’s when Saudi Arabia became unhappy

In summer 2014, Citigroup’s Edward Morse noticed that Saudi Arabia was offering its oil at lower prices than usual. On q gas station okc Others reported the same, and it was inferred that, as OPEC’s leader, Saudi Arabia was suddenly out to push down the global price. Electricity units to kwh And that is where it went—inexorably down. Gas knife lamb It was not clear how low it could go, although Morse had been forecasting for some time that it would average in the range of $65 to $80 a barrel by the end of the decade; now the plunge he foresaw seemed to be coming much, much sooner.

In effect, the Saudis had declared war on US shale. List of electricity usage by appliances Then, in November 2014, the situation bode worse for the US-produced oil: The Saudis, meeting with fellow OPEC cartel members in Vienna, declared that US and other non-OPEC oil had to be driven out of the marketplace—the cartel as a whole had to go on a war footing. Electricity billy elliot lyrics So it was that, led by the Saudis, OPEC, along with Russia, flooded the market with oil, leading prices to as low as $27 a barrel in January, a 77% drop from their peak in June 2014.

“In effect, the Saudis had declared war on US shale.” As Quartz has noted before, Morse has amassed a formidable record for getting big things right: Against the consensus, he forecast both of the most recent oil price plunges ( in 2008 and in 2014). Electricity word search puzzle In both cases, he was subject to doubt often bordering on ridicule by his peers. Gasbuddy trip There is no major oil analyst more oracular than Morse.

This time, though, while getting the plunge in prices right, Morse was less far-sighted about the rest. O goshi technique Like others, he forecast a US economic renaissance. Mp electricity bill payment Morse also missed Saudi Arabia’s war on shale. Gas bike alley On not foreseeing the global economic mayhem, he told Quartz, “nobody got that right.”

Deloitte, too, got its steel forecast wrong: Instead of a bonanza for US steel, there was a plunge in demand, as the drop in oil prices prompted oil companies to cancel their projects. Electricity related words Chinese imports, meanwhile, continued to undercut the now-struggling American steelmakers. Electricity water hose analogy On Jan. Electricity formulas grade 9 26, US Steel reported that it lost $1 billion in the fourth quarter of 2015. Electricity distribution losses This left analysts asking what went wrong

With the collapse in oil prices came the crash of employment in US cities across Louisiana, North Dakota, and Texas, and in Canadian towns reliant on the oil sands boom in Alberta. Emoji gas station North Dakota has lost an estimated 13,500 roughnecks and oil engineers, not to mention drivers, restaurant cooks, barbers, and grocery store cashiers in service businesses that sprouted up around them. Us electricity supply voltage The Canadian province of Alberta has lost some 20,000 jobs, the most in any industry downturn since the early 1980s. Electricity dance moms song Oilpatch vacancy in Dickenson, North Dakota. Electricity distribution costs (Reuters/Andrew Cullen)

A lot of Americans bought houses based on confidence in the boom, and now can’t make their payments—Texas has seen a 15% rise in foreclosures, and Oklahoma a whopping 36% increase, according to estimates from RealtyTrac. Gas blower will not start Morningstar, the rating agency, has put a third of some $340 million in mortgage-backed securities tied to North Dakota apartment buildings and other commercial properties on its watch list for possible default.

But the echo has also been heard far from the US shale patch. Electricity and circuits class 6 pdf In the once-booming, toughly run petro-state of Azerbaijan, for instance, people have been in the streets to protest higher prices and lost jobs; the International Monetary Fund, worried about Azerbaijan’s possible collapse, is speaking with government officials about a $3 billion bailout. Electricity usage calculator spreadsheet Soup kitchens are surfacing in Moscow, notwithstanding Russian president Vladimir Putin’s assertions that the country is coping fine, and that things will improve this year. Gas yourself African producers also have felt the pain. E85 gas stations in san antonio tx Like stock bourses around the world, Nigeria’s has tanked along with oil prices.

Reid Morrison, an executive with PwC’s energy practice, acknowledged that the firm erred in its forecasts. Gas oil ratio He said that PwC, like a lot of analysts, thought that OPEC was already producing at its maximum output, so that shale would satisfy whatever demand developed on top of that. Gas questions The firm also thought that, when any surplus developed, OPEC would cut production.

But he said that PwC fast caught on to what was happening once the facts changed. Electricity bill nye worksheet The firm went to clients with the changed circumstances. Gas density of air At a time when oil was selling for $95 a barrel, PwC now forecast the possibility of $50-a-barrel oil. Gas laws But it was simply not believed. Electricity kwh “The reaction we got from everyone was dismissive,” Morrison said. Wd gaster cosplay tutorial “They would say, ‘$80 a barrel is the new floor, so why are you being overly dramatic by talking bout $50?’”

“Warning of $50-a-barrel oil, he was more or less laughed out of the room.” Not all the analysts missed the clues. Electricity wiki In 2012, with oil north of $100 a barrel, where the consensus said the price had to be in order to incentivize sufficient production to feed demand, oil economist Michael Lynch told an OPEC conference that the sustainable price of petroleum was $50 to $60 a barrel. Gas cap code He was more or less laughed out of the room.

Around the same time, Philip Verleger, an oil economist who runs a consulting firm out of Colorado, predicted Saudi’s war—in a May 2012 note to clients, he forecast a “Lehman event,” referring to the pivotal role of the 2008 collapse of Lehman Brothers in the financial crash.

Verleger is a ribald iconoclast with an encyclopedic knowledge of industry history, and a penchant for deriding the judgment of seemingly everyone else analyzing the market. Gas utility In the Lehman note, he predicted that Saudi Arabia would do as it did in 1985—flood the market—and he timed it for later in 2012. Electricity bill cost per month Prices would plunge, he said. Gaston y astrid lima Even though the bull run went another two years, Verleger arguably still had more clarity than his peers. Gas nozzle keeps stopping What comes next?

In February 2015, Saudi energy minister Ali Naimi pondered aloud whether petro-states might suffer a black swan event, with oil demand drying up entirely by 2050. Gas vs electric oven cost And then what would the Saudis do? It seemed like an off-the-cuff philosophical contemplation.

“Producing countries understand that oil not produced today may never be produced,” Verleger told Quartz. When was gas 99 cents in california “Saudi Arabia was the first nation to come to this understanding. Gas leak los angeles california In response, they and other countries have acted to make sure their low-cost oil is produced first while the high-cost oil in nations such as Venezuela and Canada are left permanently in the ground.”

The notion sounds slightly wacky—does Saudi Arabia seriously believe the oil age is coming to an end? Saudi Aramco chairman Khalid al-Falih did say recently that the country intends to maintain its strategy, and keep producing oil at maximum production.