Ralph Glass regularly goes out on a limb. As operations vice-president and chief energy price forecaster at AJM Petroleum Consultants, his job includes being brutally honest in admitting that his art has limitations.

He grins when AJM chief executive Robin Mann and chief operating officer Barry Ashton recite an in-joke at the firm. “About Ralph Glass, you don’t say he’s got a crystal ball. He’s got a glass ball.”

In an Alberta Oil interview, the forecaster’s associates listen without a trace of surprise or disapproval as he makes a confession. “I didn’t see the spike coming or the fall,” Glass says in recalling quarterly price forecasts that missed calling oil’s 2008 peak near US$150 a barrel and its bottom close to $30.

“As soon as I publish the forecast, I know I’m wrong. That’s the only thing I can guarantee,” says Glass. For AJM and a smaller previous incarnation that built the firm with a merger, he has made energy price projections for almost half of his 32-year career in oil and gas production and consulting enterprises.

What Glass describes vividly in his reports is more important to the industry, its investors and creditors than the details or dates of price highs and lows. He identifies market risks. Understanding and admitting to the inevitable errors of energy price forecasts prevents wishful thinking from blinding AJM or its clients.

“You have to consider the people component,” he says. “Human behavior is very real.” His forecasts go beyond the reliance of orthodox economics on statistical projections of supply, demand and previous price averages. He considers the trading and political dimensions of oil prices, from the rowdy floor of the New York Mercantile Exchange to effects of socialist programs on state oil companies such as Petroleos Venezuelos, economic development plans in China and emerging environmental policies.

This realism helped make AJM strong enough to survive to its 10th anniversary this year with more than 60 employees. As popular visions of a quick end to the global credit crisis and recession intermittently sent oil back over $70 a barrel only to beat fresh retreats, lighting and snuffing out fires under energy share price indexes on stock exchanges, Glass sounded a warning in his mid-year forecast.

The headline on his report said, “Recovery: Beware False Hope.” As food for thought, he served up a pithy quotation from auto industry founder Henry Ford: “Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.”

Glass dwelled on a pattern that emerged during the 2008 wild ride. Oil and gas were dubbed “the new gold” as traders, who became known as “hot money,” turned commodities into financial products by rapidly shuffling futures contracts representing them in a frantic quest for paper alternatives to failed mortgage investments and a faltering U.S. dollar.

Pages: 1 2

Related Posts

• No Related Posts