Lies, Damned Lies, and Oil Statistics

In 1907, Mark Twain published several chapters of his autobiography in the North American Review; in them, he popularized the saying, “There are three kinds of lies: lies, damned lies, and statistics." 

The origin of this phrase, however, can be traced back decades earlier. In fact, the saying was used in Nature all the way back in 1885, when a judge grouped witnesses into three categories: simple liars, damned liars, and experts. 

After nearly 20 years of researching, writing, and investing in oil markets, this phrase comes to mind often.

And make no mistake: You can find all three types today. 

Lies

The simple liars in the oil industry are the easiest to identify. 

Why? Well, it’s because everyone knows they’re lying to us, yet their fibs are overlooked and treated like business as usual. 

This is OPEC. 

When I first delved into the oil sector, it was common knowledge that every member was cheating on its quotas — watching OPEC report its quotas was almost a running joke to us all. 

Of course, OPEC went even further than that.

Back in the early 1980s, Iraq announced a massive increase in its declared reserves. Two years later, Kuwait followed suit. 

A cascade of reserve increases took place over the next few years, with all the major OPEC players virtually doubling their declared reserves overnight.

I know, I know… kind of hard to believe, right?

Well, take a look for yourself:

I’ve told my readers before, and I’ll say it again louder: “It doesn’t get much shadier than that, folks!”

But again, secrecy within OPEC is nothing new or shocking. Its oil field numbers have been a closely guarded secret for decades. 

Just think, it was only when Saudi Aramco was eyeing an IPO that we learned one of the world’s largest super-giant oil fields in history — the mighty Ghawar oil complex — wasn't pumping out nearly as much oil as everyone believed. 

The Saudis weren’t extracting the 5 million barrels per day from the Ghawar that we'd all thought; it was closer to 3 million barrels per day. 

Damned Lies

The damned liars within the oil industry are all over the place, and they’re much easier to spot than the simple liars. 

Back in March 2022, as Russia’s war with Ukraine started escalating and oil prices were soaring higher, Russia’s Deputy Prime Minister Alexander Novak warned that crude prices could hit $300 per barrel if Russian crude were taken off the market. 

That price prediction was so hyperbolic it’s hard to even entertain. However, that was enough to rustle the rest of the damned liars into action. 

A month after Novak’s cataclysmic oil price prediction, JPMorgan Chase CEO Jamie Dimon came out with a more “modest” prediction of $175 per barrel. 

At the time, I cautioned people to keep $200 oil out of their mouths.

In fact, I distinctly remember being asked about my price predictions last June. One by one, people started giving their own wild predictions: $200, $190, $160. 

When it came around to me, my simple answer was that it wouldn't go much past $120 per barrel. 

And if you remember, I was right.

Oil Statistics

Look, the first two groups of liars can do their own damage to oil prices. 

When it comes to OPEC, we're able to track its tanker shipments for better accuracy, which is why people could just hand-wave the blatant cheating on its quotas.

And even though the blusterous oil predictions that never came to pass can drive public sentiments — thanks to our society’s fixation on preposterous, view-grabbing headlines — the damned liars can’t make much of a difference over the long term. 

But when it comes to oil statistics, the potential trouble ahead is astounding. 

Enter the Energy Information Administration. 

Please don’t get me wrong — I hold no ill will or grudge toward the EIA. Its analysts do the best they can and are far more trustworthy than the numbers out of OPEC. 

Lately, though, the EIA seems to be getting it wrong more than right.

After all, EIA reports were born to be revised later. 

All last year, the oil industry insisted that demand was strong and growing monthly. 

So when the EIA released demand numbers showing that U.S. petroleum consumption was lower than it was in the summer of 2020 — when the entire U.S. was locked down from COVID — your spider sense should’ve started tingling. 

Of course, a few months later, the EIA quietly updated its report to show that oil demand was far higher than it had thought. 

Well, history has repeated itself… again.

It turns out that our oil demand in November was nearly half a million barrels per day higher than we were told. 

That’s right, last November, the U.S. consumed 20.59 million barrels of oil per day — the highest its been since August. 

But it’s not necessarily what the EIA gets wrong that should get you bullish on oil in 2023. 

For that, you need to find what it missed.

Next week, I’m going to show you an oil story that’s been buried inside the EIA’s data. 

Stay tuned.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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