Editorial Comment

November 1999 Vol. 220 No. 11  Editorial

Thomas R. Wright, Jr.,  Editorial Director

Here we go again

After peaking above $25 per bbl on the NYMEX early last month, crude prices plummeted only a few days later to $20.90, registering the largest single-day loss since the end of the Persian Gulf War. The turnaround was prompted by speculation that Iraq, Iran and some other OPEC members had boosted their crude output in September. Also causing concern was a report from the "usual suspect," the International Energy Agency (IEA), which said global supplies are increasing while wealthy nations are consuming less oil than expected.

In its October report, IEA asks, "Where’s the stockdraw?" which sounds suspiciously similar to their search for the missing barrels late last year when their supply figures vastly exceeded consumption and storage volumes. This time around, IEA is wondering aloud why, with growing world demand and tightened supplies, OECD stocks haven’t fallen significantly in the third quarter.

IEA says "despite a current third quarter global demand and supply balance that implies an estimated 1.2 million bpd stockdraw, OECD stocks appear to have risen in the third quarter, due in part to upward revisions for July." However, what is probably happening is that IEA simply collected its regular set of raw numbers and plugged them into their supply / demand model without checking to see if the raw numbers made sense in the first place. IEA has certainly been suspected of doing this, as was discussed in this publication earlier (see June 1999 issue).

According to a Reuters report, other industry analysts are challenging the IEA report, "calling it puzzling and inconsistent." Peter Hitchens of London brokerage firm Williams De Broe said, "IEA’s finding on oil inventories was a ‘glaring error’" and noted that alternative surveys showed decreases in oil stockpiles in the U.S., Europe and Japan.

The IEA is not alone when it comes to suspect statistics, however. An outfit called the Oil Price Information Service (OPIS) recently surveyed 250 oil company executives with crude supply responsibilities, and survey results indicated that a majority of these folks have "lost some confidence in API and DOE oil supply data." Reasons for the lack of confidence included inconsistent data and widespread revisions."

Isn’t a shame that a commodity as pervasive and important as oil is being priced based upon numbers obtained through guesses, lies and downright fabrication? Well, it may get worse — OPIS says its survey also suggests that the current cash petroleum markets, which now trade as they have for ten years, are headed for an electronic trading platform within the next three years.

While on the "here we go again" subject, we are in the midst of the season that seems to bring a meeting or convention every week — and that’s in just the upstream sector of the industry. Along with this proliferation of powwows comes the realization that there must not be enough good speakers to go around.

Now, we’re not talking about the technical presentations: In these, engineers may sometimes "bore you with the details," but at least they are intimately familiar with their subject and enjoy sharing their knowledge. Instead, we’re referring to the managerial type speech made by some high-ranking company official.

Typically, these are presented by a vice president (at a minimum), and were obviously written by an assistant. They usually are titled something like "New Technology for the New Millennium," but end up sounding like a verbal company capability brochure. Most also could be recycled for a stock analyst presentation or for a high school career day (i.e., you name it, we can do it — better).

The worst kinds are those written by a speechwriter and rehearsed only minimally by the executive. We had the opportunity to hear such a presentation last month — the speaker read the entire speech with his head down. The one time he did look up wasn’t to make eye contact with the audience, but to see if a slide had changed.

Maybe it’s because we have endured so many of these over the years, that they seem to be more frequent and bothersome nowadays. And we must wonder if anybody ever mentioned to these folks that these kinds of speeches don’t present them or their company favorably. Probably not — bosses don’t hear them and subordinates could get fired. Apparently, everyone else is just polite.

So, we’re going to be pretentious and make a few suggestions, with the hope that they will improve a few of the meetings we all must attend. First, write your own speech. Unless you’re The Great Communicator or Slick Willie, you probably can’t read someone else’s words as well as your own. If you must utilize a speechwriter, practice, practice, practice. If you don’t have time, decline. Finally, skip the commercials and say something worthwhile.

A change for the better. Regular World Oil readers will notice a change this month to one of our regular, front-of-the-book columns. "Oil and Gas in Washington" is morphing into "Oil and Gas in the Capitals." The move, which we reluctantly admit is overdue, will allow us to do a better job covering global political and governmental actions that affect the business.

We have lined up an impressive group of contributors located in key regions of the world to write the new version of the column. The inaugural column this month will zero in on problems in the FSU. Future columns will focus on the Middle East, countries surrounding the North Sea and South America. We’ll also still hear periodically from Charles Matthews, who has done a super job over the years covering the constant shenanigans in Washington D.C. Charles will also write his yearly U.S. political synopsis for our February issue.

Let us know what you think about it.

Copyright © 1999 World Oil
Copyright © 1999 Gulf Publishing Company