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By Robert Rapier on Jan 15, 2014 with 10 responses

Grading My 2013 Energy Predictions

Normally I would have had this out two weeks ago, but the 60 Minutes story has thrown me behind schedule. I continue to get lots of comments and questions about Vinod Khosla and now his righteous indignation over how the 60 Minutes story was portrayed (especially since that was the only part of my interview they aired), so I may follow up in a week or so to explain (once more) the precise nature of my criticism — as well as what it isn’t. To be honest, I am tired of writing about it, and I am sure that regular readers are tired of reading about it, but new readers continue to ask questions that indicate they misunderstand the nature of my criticism.

In the meantime, here is my report card for my predictions from last year. In the next article, I will give my predictions for 2014.

In January 2013, I made the following five predictions for 2013:

  1. Brent and WTI crude prices will both average less in 2013 than in 2012.
  2. The Brent-WTI price differential — which has widened substantially in the past two years — will narrow in 2013.
  3. The average annual price of natural gas — as measured by the Henry Hub Gulf Coast Natural Gas Spot Price — will be higher than in 2012.
  4. The Obama Administration will approve the northern leg of the Keystone XL pipeline.
  5. US oil production will continue to grow (but at a slower pace than in 2012), reaching the highest level since 1995.


So let’s see how I did. All information for commodity prices is from the Energy Information Administration (EIA).

1. This one was mixed. The daily average closing Brent crude price averaged $108.56/barrel (bbl) in 2013, down 2.8 percent from 2012′s average closing price of $111.63/bbl. West Texas Intermediate, on the other hand, traded higher. The average closing price for WTI in 2013 was $97.98/bbl, up 4 percent from the 2012 average closing of $94.05/bbl.

2. This one was correct. The average Brent-WTI differential in 2012 was $17.58/bbl. I based my prediction on the fact that there were a number of pipeline projects expected to come online in 2013, which would somewhat alleviate the glut of crude in the mid-continent region of the US. While I expected Brent and WTI to both trade down, I expected that WTI would hold up better as the glut was relieved, and this would narrow the gap. In fact, the gap almost disappeared entirely in the 3rd quarter, but had widened back out by year end. For 2013, the differential averaged $10.57.

3. This one was correct. In 2012 the average closing price for Henry Hub natural gas was $2.75 per million British thermal unit (MMBtu). I didn’t believe that low price could be sustained, as this is below break-even cost for most natural gas producers. So natural gas producers responded to the low prices by shifting drilling rigs from gas production over to oil production, and a number of predominantly gas producers shifted to more oil production. Thus, natural gas production was relatively flat in 2013, and prices firmed up to an average for the year of $3.73/MMBtu.

4. This was the only complete miss. I have been surprised at the inability of the Obama Administration to make any sort of decision on this pipeline. In fact, I also made this prediction for 2012, so the Administration has been kicking this can down the road for quite some time. But I have learned my lesson. I am not making any more predictions on the Keystone XL Pipeline.

5. This one was correct, except for the qualifier. US oil production did continue to grow, and in fact reached the highest levels since 1989. Final production numbers won’t be available for a couple of months, but through October 2013 US oil production averaged 7.4 million bpd — and reached 7.8 million bpd in September and October. Average daily production is 2012 was 6.5 million bpd, which was an increase of 800,000 bpd over 2011′s production. I was confident production would once more expand in 2013, but didn’t think the 2012 increase could be matched. At this point the huge 2012 production increase looks like it will actually be exceeded, with a final 2013 increase looking like about 1 million bpd over 2012′s production.

Overall, that’s not too bad for making predictions about the future. Only one complete miss of the five predictions, with a split decision on oil prices and an underestimate (probably) on the extent of the 2013 oil production increase. In next week’s article, I will make my predictions for 2014.

Link to Original Article: Grading My 2013 Energy Predictions

By Robert Rapier. You can find me on Twitter, LinkedIn, or Facebook.

  1. By Bob on January 15, 2014 at 11:10 pm

    My prediction: Robert Rapier comes up with a completely disruptive innovation in CleanTech, Khosla Ventures funds it and we all live happily ever after. :)

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    • By Robert Rapier on January 15, 2014 at 11:40 pm

      That’s funnier than you know, because we have a number of pretty close colleagues in common. I don’t think Vinod even realizes how many.

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  2. By Optimist on January 16, 2014 at 7:57 pm

    Learned your lesson, eh? I would say the lesson should be: don’t predict what a politician would do, no matter how obvious the choice. The depressing bottom line: fewer and fewer voters are swayed by reason. And it’s happening on both sides…

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  3. By daveswenson on January 16, 2014 at 9:53 pm

    Keep predicting and keep writing. Please include an ethanol policy related prediction. The stakes seem to be rising for corn ethanol, and the fledgling cellulosic projects offer interesting and alternative wildcards for the conventional versus advanced biofuels policy debate. Right now corn ethanol is counter punching rhetorically with all that it has to punch with, but policy makers appear to be deafened by other issues.

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  4. By Ed_Reid on January 17, 2014 at 8:46 am

    “Predictions are hard, especially about the future.”, Yogi Berra, American philosopher

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  5. By Forrest and Jan Butterfield on January 19, 2014 at 7:44 am

    The year end review evaluations of ’13 predictions may be on target, but the future projections for energy may well miss the target if not accounting for a development upon coal technology. While 2013 was the year of coal, EPA basically regulated the industry to be more costly as compared to renewable sources per the CO2 regs since CCS technology expense would double the cost of coal generation. But a company from Texas may change all that and make coal as green as wind or solar. A private company Skyonic is building first commercial coal plant pollution control application. The equipment about the size of semi tractor trailer, costing $125 million, and replaces smokestack scrubber. The technology adaptable to present coal plants and can scale up to whatever EPA shifting sands demand. The equipment most efficient at 90 percentile reduction, but can go to high 90′s. The patented process mineralizes pollutants to marketable co-products of bicarbonate soda, nitrous oxides, hydrochloric acid, bleach, chlorine, and hydrogen. The CO2, SOx, NO2, Mercury, and other heavy metals gone from waste stream. The selling of co-products make the process profitable. So, considering the unreliable characteristic of wind and solar and the rare earth metals requirements, huge investments, cost, dirty back up power requirements…why waste our hard earned money? Direct investments to energy storage technology and smart grid control instead, problem solved with nuclear and coal and done so on a budget! No heavy handed government control of energy economy required per environment concerns. Also, per RR column foreign coal the real challenge to global warming….meaning little we can do to turn the tide excepting inventing technology to solve coal pollution problems and make the technology cost effective. Hopefully this Texas company is successful.

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  6. By Ronald Lindeman on January 19, 2014 at 9:59 am

    Don’t know if you knew about this thing going on here http://www.twincities.com/business/ci_24920451/st-paul-investors-testify-fraud-trial-bixby-energy in Minnesota.

    What’s the difference between investment and fraud? I suppose when they ran natural gas thru their machine to fool investers that it was coming from the coal.

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    • By Robert Rapier on January 19, 2014 at 10:32 am

      I didn’t know about that, but it’s all too common. The line between investment and fraud can be pretty thin. I know plenty of promoters who have misled investors, and yet it gets chalked up to them being optimistic about their chances for success. In reality, many times they know better in which case it is fraud.

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      • By RBM on January 19, 2014 at 11:33 am

        Yes, it’s too common, and as a consumer of such information I’ve added a mental filter to process such information.

        I watched Vinod’s interview with Lesley with the precise filter of ‘hype or optimist’, in place. In such a case of the interview, the ideal would be to have the interviewer with MORE knowledge than the interviewee. Typically the ideal is not met.

        This is why I value your work and efforts on ‘Cleantech’, specifically, and Energy, in general.

        Thanks, Robert

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    • By Forrest and Jan Butterfield on January 19, 2014 at 6:52 pm

      If your referring the Bixby stoves and Robert Walker founder of Sleep Number beds….i’ve followed his adventure for some years. During the Bush energy shortage years and government incentives for alternative energy, this guy took his gasification technology from pellet combustion and directed efforts for alternative energy. He stayed within gasification, but switched to coal fuel and claimed spectacular conversion rates. He had research from the University of Minnesota prof that bolstered claims. At one point a Purdue Chicken coal gasification project under brick and mortar construction. I think the plant was in operation, but quickly folded. He was very good promoter. A salesmen and believer. He enjoyed much positive PR from mainstream media afraid to qualify his claims as he was a genuine enthusiast and minority American Indian heroin inventor businessmen with his sights upon the countries biggest challenge. He dare stand tall against the corrupt petrol industry whom he always claimed were trying to destroy his invention and reputation. He had to be extra careful and secretive to survive. Also, he did not want the usual capitalist investing and held out for average Americans to gain fortunes. The blog was full of naive first time investors giggling with enthusiasm. They loved this guy and many a widower retiree invested life savings. Bless you Mr. Walker for thinking of the poor! Actually, the guy did think he could accomplish the mission. He was full of positive thinking, just not critical thinking.

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