by ReserveGrowthRulz » Tue 10 Jan 2006, 22:33:48
Okay, so it appears that your first cut at data is to fit an equation to the data. Fine. Single polynomials, triples, sixth degree, whatever. Sounds not much different than decline curve analysis for reserves reporting. Except the accountants get cranky over any math they aren't familiar with.
However, I would think that just curve fitting doesn't actually predict or explain anything, its just best fitting a line to data. Without considering the bits and pieces that go into WHY things go up and down, isn't fitting trends just as good a shot in the dark for an answer as what Simmons does? Pick a position, show the data you like which supports your guess, and off to the races.
Using a trend projection means you are fitting THINGS which happened, some of which may happen again, some which may not, some of which were intentional ( oil embargo's ) and some of which weren't ( hurricanes knocking out production in the GOM, recessions ). So...once you've got a curve fitting routine which cycles through these events, it sure sounds like you have just "trendized" things which may or may not happen again, which may or may not happen at the same distance in time from each other that they did in the past, in general its just curve fitting, and while it fits the data to such and such a goodness of fact, or accounts for this much or that much of the data, it doesn't actually MEAN anything other than it fits the past okay. So...using the past to predict the future, how does your trend handle another Iranian revolution? Embargo? Worldwide recession? Electric cars in the States? Seems like any large event would negate any predictions you could make off the trend in the first place?
Don't take this as a putdown, it just seems like you are trying to use an equation to summarize the last 30 years of geopolitics, embargo's, wars, Saudia enforcement of quota's, and the equation has NOTHING in it related to those THINGS...it just hits the past data better than some other kind of equation, without explaining it, and without being able to count on it for predicting much of anything.