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« Wasted Green - Josh 340 | Main | The ever-changing story of Stern »
Thursday
Aug272015

DECC's oil price forecast updated

I thought it might be interesting to see how the DECC fossil fuel price forecast - you know, the one that  is said to justify all those subsidies, feed-in-tariffs and renewables obligations. The comparison is startling - I've added a dot with today's Brent crude price.

The claim that decarbonisation would only cost a few percentage points off GDP seems to have been a fairy story.

In related news, GWPF have again called for DECC to be closed down.

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Reader Comments (23)

Very unusual prediction!

Here: http://cdn.oilprice.com/images/tinymce/Evan1/ada26.png shows the price during 2014, DECC start there prediction at the correct level but forget to take note that during 2014 the price is flat or slightly falling.

Still, we should not expect facts to stifle the message in anyway.

(link from: http://oilprice.com/Energy/Oil-Prices/No-Rebound-In-Sight-For-Sliding-Oil-Prices.html )

Aug 27, 2015 at 9:49 AM | Unregistered CommenterSteve Richards

You can't hold this against DECC. Nobody is any good at predicting the price of oil.

Aug 27, 2015 at 9:58 AM | Unregistered CommenterRichard Tol

Naughty Bish, they are not 'forecasts', they are 'projections'.
From the Introduction-
"These projections are required for long-term economic appraisal and therefore reflect long-term trends.
These are not forecasts of future energy prices.
These new projections will feed into work across Whitehall on appraising economic impacts of policies."

I hope you are clear now on the distinction between forecasts and projections. < /sarc >

Aug 27, 2015 at 10:14 AM | Registered CommenterPaul Matthews

Can't wait for their next set of projections.

Aug 27, 2015 at 10:31 AM | Unregistered CommenterAlan Reed

The problem is not so much their failed prediction, as Richard notes commodities are notoriously hard to predict, as their blinkered belief that this prediction was in any way meaningful or useful enough to base policy on.

Basing policy on predictions with significantly underestimated uncertainty *increases risk*, because the long term outcome is highly likely to be outside of the range of conditions you have planned for. This is a problem not only for predictions of oil price, but also predictions of future climate, where the range of predictions is far too narrow (and biased).

This is why Dr Curry's focus on the uncertainty monster is so important. Firmly held delusions in places like DECC cause considerable harm.

Aug 27, 2015 at 10:44 AM | Unregistered CommenterSpence_UK

@ Richard Tol at 9:58 AM "You can't hold this against DECC. Nobody is any good at predicting the price of oil."


@ Paul Matthews at 10:14 AM "These new projections will feed into work across Whitehall on appraising economic impacts of policies."


Perhaps "...... all those subsidies, feed-in-tariffs and renewables obligations ..." should have been Index Linked?

Aug 27, 2015 at 10:54 AM | Unregistered CommenterJoe Public

Interesting quote, Paul:

These projections are required for long-term economic appraisal and therefore reflect long-term trends. These are not forecasts of future energy prices. These new projections will feed into work across Whitehall on appraising economic impacts of policies.
When these 'projections feed into work across Whitehall' does the fact that they are hopelessly off beam mean that all the other work being done by Government is going to be as badly skewed?

And, are these the same people making these projections who are telling us the price of shale gas will not come down?

Aug 27, 2015 at 11:39 AM | Unregistered CommenterHarry Passfield

Richard Tol: "You can't hold this against DECC. Nobody is any good at predicting the price of oil."

Exactly, so what kind of idiot bases subsidies and cost to tens of millions of people on things they know will be wrong?

Aug 27, 2015 at 11:53 AM | Unregistered CommenterTim Hammond

Tim Hammond 11.53, What kind of idiot?

Idiots who believe in their own sense of self importance.

That is why so many idiots become politicians, and why climate scientists think they can control the world's destiny.

Aug 27, 2015 at 12:08 PM | Unregistered Commentergolf charlie

'DECC's oil price projections are well within industry-guideline standard margins of computer-model measuring error, and are thus impossible to refute and enjoy accuracy ratings of exactly 97%', a DECC spokesperson said earlier today.

Aug 27, 2015 at 12:13 PM | Unregistered Commentercheshirered

I know exactly where oil prices are going but nobody will remember and I will not be given the adulation and praise I deserve ^.^.
A couple of years ago I predicted the $5o oil price here on BH but nobody remembers because as you know I am a nobody.
The oil price is going down to around $30/barrel and the reason will be the same as it was when I predicted $50; Shale.

Aug 27, 2015 at 12:26 PM | Registered CommenterDung

What Spence_UK said.

It isn't the wrongness that's culpable, it's taking highly speculative and unreliable guesses and treating them as if they are well-founded and reliable - and spending billions of our cash on the back of it.

But luckily for those concerned, it's the sort of culpability which is NEVER followed by punishment (appropriate or not).

Aug 27, 2015 at 12:28 PM | Unregistered CommenterFen Tiger

@Fen Tiger

What the DECC actually did was 'gamble' tax payers money on their hunch about future hydrocarbon prices although if you want to be really cynical: they knew prices would not rise but wanted to commit the UK for ideological reasons.

Aug 27, 2015 at 12:38 PM | Registered CommenterDung

No doubt they equally believe that temperatures cannot fall. Even though an 18 year plateau in temperatures suggest they will.

Aug 27, 2015 at 12:58 PM | Unregistered Commenterssat

Models eh.....gigo.

Aug 27, 2015 at 1:13 PM | Unregistered CommenterJamesG

Dung 12:38

But that's what gamblers with an infallible system always do: they think they have knowledge that ensures a positive outcome.

As to there being something more malign behind it: yes, for sure. Environmentalism is a political ideology, a nasty one (viciously misanthropic, morbidly pessimistic, authoritarian, reactionary and snobbish): and, as such, very attractive to the usual suspects in the media and the universities. Most of the politicians just run along behind.

Aug 27, 2015 at 1:53 PM | Unregistered CommenterFen Tiger

Data on the forward price curve is available here:

http://www.barchart.com/commodityfutures/Crude_Oil_Brent/CB?search=CB*

Under $63 for 2022, $60 for 2019, and around $50 for 2016

Aug 27, 2015 at 2:18 PM | Unregistered CommenterIt doesn't add up...

It doesn't add up

I think I'm right in saying that the forward and the spot price are not directly comparable. But something can be inferred from the relative movement.

Aug 27, 2015 at 2:24 PM | Registered CommenterBishop Hill

The DECC forecast published in October 2012 gave a central estimate of $3.1/bl increase by 2015, from $115 to $118.1 (love the 0.1 bit!).

With 2015 prices averaging around $50/bl, the estimate is a bit off. Instead of a $3.1/bl increase, currently we have a $68/bl decrease. The estimated change was off by more than a factor of 20, and it had the wrong sign.

BAU at DECC, then.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/65698/6658-decc-fossil-fuel-price-projections.pdf

Aug 27, 2015 at 2:46 PM | Unregistered Commenterchris y

wasnt there supposed to be a "peak oil" somewhere?

I remember all those lefty gasbags "knowing it all so well", just a few years ago.

Aug 27, 2015 at 4:55 PM | Unregistered CommenterVenusNotWarmerDueToCO2

"wasnt there supposed to be a "peak oil" somewhere?" There always is a "peak oil" - that is the amount of oil in established and well researched untouched reservoirs. It does not include oil not yet found or in places that cannot be reached with current technology. So as finds increase and technology develops "peak oil" has a tendency to creep out into the future. So far out of reach.

Aug 27, 2015 at 7:20 PM | Unregistered CommenterJohn Peter

One of your more humorous posts. But do not despair, the "peak oil" nutters are immune to learning from reality.... or even acknowledging reality. I doubt their nuttiness will never stop being a source of amusement. My personal view is that they suffer from terminal stupidity, but some might argue the disconnect from reality is just a politically motivated show.

Aug 28, 2015 at 2:33 AM | Unregistered CommenterSteve Fitzpatrick

Prediction is very difficult, especially if it's about the future." --Nils Bohr
So why do these arrogant idiots think they can?

Aug 28, 2015 at 9:55 AM | Unregistered CommenterBitter&Twisted

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