I don’t know what it’s like to be the editor of a mainstream media news outlet, but it must be a miserable job. The popular information world has sort of gone off its rocker with the demands to be entertaining, insightful, current, hip, and wise, non-stop, all day long. It’s one thing to work on a story for days or weeks, as institutions like Reuters often do; the end result can be insightful journalism.
Some institutions like Bloomberg however have resorted to the equivalent of painted monkeys dancing in a window, hooked up to a battery to jolt them if they ever slow down. Whoever is behind the scenes must relentlessly pound on the poor under-fed junior staffers out front to crank out stories every 15 minutes, and they’d damn well better get a lot of views, or your sorry little proto-journalist *ss will be in the unemployment line.
What makes this even more galling is that sometimes the story content may actually be decent, but the headline is achingly stupid. These large institutions know that the news flow is so huge (even on their very own sites) that most people don’t have time to read everything. A lot of “common knowledge” becomes common knowledge because we see variants of the same theme ten times a day and are brainwashed into thinking that it must be right.
There can be no other way to explain such an epically and brazenly senseless headline such as this from a week ago: “Oil holds gain as Iran concerns counter bearish U.S. rigs report.” You will note if you open the link that it is to the World Oil site, which ran the Bloomberg story. At some point it appears that Bloomberg agreed with me because the Bloomberg site no longer carries a story with this headline.
You may read the headline and think, well, there’s nothing wrong with it; obviously the resident BOE crank is crazy from the heat. Not so. Take a minute to consider the message it sends, then consider the supporting evidence. And then maybe you’ll see why it is a big deal, over time.
First, consider the message conveyed if only reading the headline. Oil prices rose, apparently, which is a harmless enough statement and probably true (at that instant anyway, these stories often update market events every half hour). Next is a message that the market has some concern over events in Iran, but that the Iran concerns were able to offset a bearish rig report. In other words, two big factors impacted the price of oil on that day, and one had a slightly larger impact (the price gain referred to was about 35 cents per barrel) than the other, but they were more or less equally significant (or the market would have reacted more violently).
There you go, headline skimmers. If all we do is read headlines, we now know that two things happened that day, one being concerns about Iran’s production and the other that the US added a lot of rigs. The takeaway is that whatever rigs the US added were as significant as the Iran concern.
Now let’s think about what this headline actually tells us. Not what the story said, but what the headline implies relative to the events of that day.
That morning, Iran said that it wouldn’t be meeting with officials in the US at the United Nations, meaning that the Trump administration’s sanctions were likely to proceed. The upshot of this would be that about a million barrels per day would be removed from the market. Being one percent of global production, that is indeed a significant event.
Now here’s the issue: what exactly happened with respect to US rig counts to “counter” this news? Drum roll please…13 rigs were added. In the US. The report doesn’t even consider the rest of the world (where 38 rigs were added).
Let’s go completely crazy and say those were all Permian bound, and that they would drill the best wells ever at 5,000 barrels per day. Those rigs would therefore add 50,000 b/d which would be half that in a few months (with no guarantee they’d add more; perhaps ten rigs would be racked the following week).
Do you see a problem here? Actually, there are two. If you casually read this you would think that the impact of the US-added rigs is somewhat similar to that of Iranian sanctions. You would be as correct as believing that a piano falling on your head is comparable to a nerf bat assault.
The second problem is that if you believe this sort of nonsense, that’s one thing, and may impact your investment portfolio or distort your knowledge of the importance of the US drilling rig count. But globally that isn’t a big deal (unless you are globally a big deal, which I suppose you could be). What is a problem when these half-witted analyses become part of the general lexicon and taken for granted by governments, investment advisors, market commentators, educators, etc., which happens, and then we’re in big trouble, because we then see some very unwise decisions based on “information” that is patently false.
If you think that’s hyperbolic and untrue, consider the US housing crisis of last decade. The mass media was full of booster-ish stories about rising property values, investors making fortunes in real estate, housing demand remaining strong, etc. Almost everyone believed in this miracle, even the chairman of the Federal Reserve Bank in the US. A few bystanders watched from the sidelines, scratching their heads, and saying “This is all bullsh*t” (as was brilliantly documented in the Michael Lewis book The Big Short (and subsequent movie)). They stood alone, or almost alone, and most people dismissed them as cranks. But consider one bit of evidence from the housing boom: mortgages were being given to people with no income, no jobs, and no assets, and the whole world stood there and watched it happen. The mainstream media found little newsworthy there; they would occasionally mention such lunacy but get right back to housing news. We all know how that fiasco ended, and it was in part brought to you by widespread acceptance if idiotic headlines. It is not pedantic to point out these flaws; over time they can destroy you.
Energy is in these crosshairs now, and the public, including governments and curious bystanders, are hypnotized by the effluent that daily flows out of organizations like Bloomberg. When we absorb these messages that all that matters is US oil production, we are headed for a fall of some sort.
In sum then, for your energy news, stick to the BOE Report.
Read more insightful analysis from Terry Etam here. To reach Terry, click here
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