Suggestion to Consulting Meteorologists

[Frank2]

Just a suggestion - if your clients are oil and gas companies, perhaps you can avoid not telling them something similar to, "In 10 days, the GFS hints at development in the Western Gulf!"

Last season, one consultant who posts regularly on this message board (I don't remember who) said that he mentioned something which sounded very similar to the "10 day GFS" comment mentioned above, during a weather briefing of oil and gas company executives - a forecast that far out is just not very reliable, and, considering the price of gasoline products, will only fuel (pardon the pun) more speculation on the part of those who are already reaping windfall profits - at our expense (literally).

Now, some might disagree very strongly, but, to say that a model "hints" at something happening 10 days from now is not a valid reason to mention this subtle possibility to anyone - someone can "hint" that they might do this or that 10 days from now, but, it doesn't necessarily mean that they will end up keeping their word...

Someone I know very well, who has a large stock portfolio in the petroleum industry, is content with the current turn of events, saying that we shouldn't complain about the "cheap" cost of gasoline, considering the current European level of $8-$10 (USD) a gallon!

I mention this because the indifference of oil company executives was very apparent during yesterday's Congressional hearings, and, it seems not only true of themselves, but, of many of their investors who seem to have wealth in everything but a conscience, who are constantly looking for any reason to increase their net worth...

Please try to keep this in mind when giving your clients "long-range" forecasts that are based on unreliable models - what you say or don't say can have a far-reaching efffect...

I know this is not a "politically correct" thing to mention, but, someone had to say it, since many, as mentioned on CNN last evening, are now forced to decide whether to buy food for their family or gasoline to drive to work...

Thanks

[Ed Mahmoud]

As someone who works for a small oil company, I will say many of the large integrated producers buy much/ a majority of their oil from the national oil companies of OPEC nations, and aren't making out quite as well as you think. The companies that do have a lot of production are doing fairly well, although margins aren't higher than, say, pharmaceuticals, software, soft drinks, entertainment, etc. Some companies people might be familiar with, such as Valero/Diamond Shamrock and Sunoco, divested their E&P businesses back during the less than $10/barrel busts of the 1980s and 1990s, and aren't making any additional profit, in some cases, are making smaller profits, since gasoline prices have lagged oil prices this latest go around. I was laid off in 1998 during $10 oil, and there wasn't a whole lot of sympathy expressed for unemployed oil workers.

Any attempt to 'punish' oil companies for making too much money, with a 'windfall profits' tax that sets an effective cap on oil price well below the actual price, will just discourage US exploration and production, thereby increasing the actual price of oil.


Back to the meteorology, the Euro used to be Joe Bastardi's favorite model, and he was really talking up an early season storm forming in the Caribbean last year based on multiple runs of the model, and he got burned. I think that is why he isn't in love with the Euro anymore.


Of course, any old schmo, or oil speculator, can find a 240 hour Euro or GFS model run on the internet and post it on a bulletin board about a possible storm in the GOMEX, and still produce a run up and skip the middle-man, but, of course, Joe Bastardi or some other private met saying it adds some "oomph" to the news.


BTW, I think a good part, maybe even most, of the revenue JB generates for AccuWx comes from energy interests, and if they are paying for his services, including long lead time suggestions of tropical cyclone activity (for things like scheduling rig moves and platform deployments, which take several days and require a lot of planning, and fairly calm sea conditions) then he has a responsibility to keep them informed.


BTW, JB has been suggesting early season Caribbean development chances since before the GFS started picking up on it. I read his PPV column (but am not a big money subscriber, who get the news a few days earlier) and based on what he expected of the long wave pattern, and the MJO cycle, he has been mentioning early June development for well over a week.

[Frank2]

Ed,

Thanks for your comments, as seen from someone who works in that field - as you mentioned, profits are not only something of the oil industry, but other industries as well, and, in my opinion, is the sign of a much bigger problem...

I'd forgotten about the oil depression days of 10 years ago - how times have changed...

I agree - sometimes, for logistical purposes, a long-range forecast is needed, but, as in the JB case of last year ("...a 970mb hurricane south of Long Island!"), sometimes, the benefits of a long range forecast can be turned around and made into something that is of more harm than good...

The Weather Channel, who usually has been fairly conservative when it comes to that, also was part of that fiasco last year, especially when it came to their "A&B" program, which seems to be a noisy gong at times, more than anything - apparently, the producers seem to think that "fun forecasting", even if it means giving the public "hyped information", is still better, at least when it comes to ratings...

Beyond ratings, they seem to forget that people do accept what they are saying as authoritative information, even when they are wrong - whether intentionally or unintentionally...

Still, forecasting, in my own opinion, should be more focused on the "on the map" issues, as we used to do in the business, rather than trying to guess at what only God knows of the future...

Thanks again,

Frank

[jasons2k]

Just something to add to the discussion, in regards to the "indifference" of the Oil Execs:

Congress makes it a priority (seems like quarterly now) to grill the evil oil execs for making outrageous salaries and in-turn shafting the rest of us. Here's some facts to consider:

The federal gas tax is 14.8 cents a gallon
The state gas tax here in Texas is 20 cents a gallon
The oil companies take about 8 cents a gallon

So, we pay about 35 cents a gallon in taxes and the oil companies make less than a third OF THAT - of the taxed amount - in profit.

And yet these Senators sit back and lecture the oil companies and get all kinds of air time & press doing so.

Only in America.

I'd be pretty indifferent too. In fact, I wouldn't just be indifferent, I'd be pretty PO'd that I was being used as a scapegoat for a problem much, much bigger than my salary. They need to give Congress a reality check and a lesson in economics.

And yes, Ed is right. Back in the 90's when gas was 78 cents a gallon and the oil companies were dying off, nobody then was crying for a government bailout for them.

[Frank2]

Still, it seemed that whenever a meteorologist, or someone who thinks of being one, would start making excited comments about one model or another "hinting" at a tropical system days or weeks ahead (moreso if the model "hinted" at a significant system in the Gulf), it seems that within a few days (3, by my count), the price of gasoline would increase - if I owned a business that used heresay to increase the value of what I was selling to an eager public, I'd be a millionaire, too...

What angered me more was the after-effect - did that artifical increase, decrease after the erroneous model was shown to be wrong - of course not! If we took all of the increases that could be attributed to erroneous information or speculation and removed them, the price per gallon would drop instantly - and considerably...

I might be wrong, but, that type of sharp business dealing, the last time I checked, is dishonest, since it only hurts the poor - at this point in time, the rich only consider the gasoline issue to be an inconvenience - not the poor, especially the rural poor who need to drive to most everywhere...

[flamingosun]

depending on where you live in Florida, your overall gasoline tax can vary from an average of 52.9 cents per gallon to 45 cents per gallon. And the oil companies make 8-10 cents per gallon. Seems the government 'makes' a LOT more per gallon than the oil companies.

Here's a chart by state of each state's cut of the pie. (On top of the federal gas tax)
http://www.gaspricewatch.com/usgastaxes.asp

[Frank2]

Well, I wouldn't feel sorry for the poor oil companies for their "small percentage", that's for sure...

Yesterday, a gallon of Diesel reached $5 in this area (at a Mobil station I frequent), so, someone's getting very rich...

Again, someone I personally know, who has a stock portfolio, is mighty pleased with the current turn of events, that's for sure, so...

Considering that we MIGHT be seeing something in the Gulf over the next week or so, this is where the "fun" starts - in the near future we might be looking back on the days of "cheap" gasoline...

But, I won't say anything else on this topic, since, as Jesus said, those who'll listen, will, and, those who won't, will not...

***END***

[psyclone]

ya gotta be kidding me Frank. complaining about the price of refined products in light of crude's meteoric rise is laughable. in the past year crude has doubled while the price of gas has only moved up about 20%. If last year's crack spreads (the price differential between crude and refined products) had maintained year ago levels we would be paying close to $6.50 for regular. If you don't believe me take a look at any pure play refiner over the past year like Tesoro (TSO), western refining (WNR), Valero (VLO) or Frontier oil (FTO). some of these guys are barely making money due to gasoline and diesel prices failing to keep pace with crude. you should start a thread celebrating the fact that prices are so low relative to the raw material. And get some stock tips from your friend.. 'cause complaining don't pay.

[MGC]

My brother-in-law works for Shell Oil at the refinery in Norco, La. He has been with Shell nearly 30 years. Every time I visit, we discuss the oil business. He is currently worried that the unit he works in, olefin, might be shutdown due to low demand. He also said that Shell makes a very low profit on its refined products. So, where is all the monies going?.....MGC