Editorial Comment

Feb. 2002 Vol. 223 No. 2  Editorial Comment

Thomas R. Wright, Jr.,  Publisher

Forecasting on a roller coaster. Without doubt, the toughest part of putting out this magazine is making the twice-yearly activity forecasts. This is especially true when the trends used to predict the future resemble those new monster roller coasters popping up at amusement parks around the world. For an example, see the graphs of international and U.S. rotary rig activity on page 16 this month.

Not surprisingly, the terrorists’ attacks on New York City and Washington D.C. of last September make the process even more difficult, since nobody could have imagined their far reaching economic effects. When the faltering economies of several countries around the world are added to the equation, the crystal ball gets even cloudier. And finally, incomplete, or even inaccurate, data tend to make the effort impossible. Nevertheless, we must persevere.

U.S. economy. Because of America’s thirst for energy, its economic health has a significant effect on the world’s supply / demand balance. Thus, it is good news that the Federal Reserve is saying the U.S. economy is exhibiting initial signs of recovery. Cited as examples are strong automobile sales across many regions, increases in new manufacturing orders in some cities and a rebound in travel and tourism, which is highly significant, given the events of 9/11. The Fed also notes growing confidence by company officials who participated in the agency’s survey.

Natural gas. The dramatic drop in drilling late last year will result in much tighter gas supplies later this year. According to Leonard Parent (see his article elsewhere in this issue), the number of rigs drilling for gas in the U.S. will likely bottom at 600, which is the number needed just to replace reserves. In the Gulf of Mexico, which is the best source of new reserve additions, new fields now going on stream are declining at 50% per year, which means gas drilling must remain high for the U.S. to stay even.

Oil prices. Matthew Simmons (also in an article this month) notes that the speculative "shorts" contracts listed on the NYMEX illustrate that most observers believe oil prices will stay low. However, he also says OPEC’s compliance with its production quotas will be key to where oil prices land this year. World Oil Editorial Advisor George Littell thinks OPEC will be able to maintain discipline, at least on paper. He also says that the 5 million bpd in quota reductions (3.5 million in 2001, 1.5 million last month) will amount to around 3 million bpd in actual cuts this year, which is enough to offset the demand losses resulting from 9/11. With these fundamentals in place, Littell foresees an average WTI spot price of $28 this year. Given where prices are today, many will no doubt look askance at this projection, but nobody we know of has been more accurate in recent years than the firm of Groppe, Long and Littell.

2002 outlook. Considering the above, plus many other factors discussed further into this issue, worldwide E&P activity will recover during the second half and finish only about 8% below last year’s levels. Considering the dive industry has been in recently, it’ll be nice to ride the roller coaster up again.

Evidence refutes global warming. There seems to be a steady stream of media stories about how this or that proves the GW theory, but the other side of the argument rarely gets mentioned. Thus, we were not surprised when some new evidence challenging GW was buried in a small article in the local newspaper.

According to an Associated Press story, new measurements show the ice in West Antarctica is thickening, reversing earlier estimates that it was melting. Now, one would think that this should assuage scientists’ concerns that higher temperatures would melt the massive ice sheet and cause worldwide sea levels to rise.

Two researchers from California (yes, California) say that if the thickening is not merely part of a short-term fluctuation, it represents a reversal of the long retreat of the ice. These findings by Ian Jouglin of the California Institute of Technology and Slawek Tulaczyk of the University of California, Santa Cruz, come less than a week after a separate paper in Nature reported that Antarctica’s harsh desert valleys have grown noticeably cooler since the mid-80s. In that study, air temperatures recorded over a 14-year period ending in 1999 were stated to have declined by about 1°F in the polar deserts and across the "White Continent."

The scientists say that Antarctica is the only continent that is cooling. But they could not say why. Could it be that they have been wrong about the other continents as well?

Were we warned about bin Laden? Despite his good intentions, Lt. Colonel Oliver North took great liberty with U.S. law as he and others tried to help their friends in Nicaragua. Now, according to an e-mail making the rounds, when he was caught and called before Congress to testify, he reportedly identified the individual who we now know as the most-wanted man in the world.

When North was asked if spending close to $60,000 for a home security system was just a little excessive, he replied, "No," saying his life and his family were threatened by a terrorist named Osama bin Laden. Then, according to the e-mail, North was asked what should be done about him. North’s purported answer: "If it were me, I would recommend an assassin team be formed to eliminate him and his men from the face of the earth."

While the above makes for interesting reading, it isn’t true. When Colonel North testified before Congress in 1987, he actually cited threats on his life from the infamous Palestinian terrorist Abul Nidal, not Osama bin Laden, who was busy fighting the Soviet occupation of Afghanistan at the time. In addition, North’s response to the e-mail was, "As you will note, the originator attributes to me certain statements regarding Usama bin Laden (North’s spelling) and other matters that are simply inaccurate. Though I would like to claim the gift of prophecy, I don’t have it."

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