Climate Orthodoxy: The Limits of Professional Judgment

The climate orthodoxy that human activities are primarily responsible for warming since the mid-20th century rests mainly on a foundation of professional judgment, not scientific research involving falsifiable hypotheses.  That foundation is also the basis for the so-called consensus of scientists, which has been shown to be an “alternative fact.

There is nothing wrong with being guided professional judgment as long as it is recognized that professional judgment does not equate to factual certitude.  Michael Lewis in his most recent book, The Undoing Project writes about the work of two psychologists, Amos Tversky and Daniel Kahneman (a Nobel Laureate in economics) whose research completely changed our understanding of human decision making and behavioral economics.  The bottom line is that humans—no matter what their calling and education—are not as rational as they think they are.

Tversky and Kahneman’s insights on professional judgment and the use of subjective probabilities justify a reasonable level of healthy skepticism about the role of professional judgment in shaping the narrative on climate change.

All of us give weight to professionals who advise us or who are considered experts in a particular field.  However, Tversky and Kahneman demonstrate that too much weight and too little skepticism is given to professional judgment, especially on subjects not rich with empirical data.  In a paper on how people make judgments, Subjective Probability: A Judgment of Representativeness, they wrote, “The decision we make, the conclusions we reach, and the explanations we offer are usually based on our judgments of the likelihood of uncertain events … .  In … many other uncertain situations, the mind did not naturally calculate the correct odds.”    Instead, “it replaced the laws of chance with rules of thumb”. When people make judgments they compare the specific topic with a mental model.

They also addressed when the rule of thumb—heuristic—approach leads to “serious miscalculation and concluded it was when the matter involved judgments under uncertainty.  “ People do not appear to follow the calculus of chance or statistical theory of prediction.  Instead, they rely on a limited number of heuristics which sometimes yield reasonable judgments and sometimes lead to severe and systematic error.”

Their work is relevant to climate change  because it is a relatively new field of knowledge and much about how it operates is not well understood. Distinguishing between what is reasonably well known about climate processes and what represents assumptions and best judgments should be more explicit, leading to a greater level of humility and less certitude.

The weakness in this perspective is the implication that scientists who believe that the science is settled and support the climate orthodoxy have the same failing. How could that be?

Many, perhaps most, of the scientists who represented the thinking in the 1980s when climate change was just emerging issue had been active in the environmental movement and advocates of the limits of growth narrative.  Maurice Strong, an environmental activist, and John Houghton, the first chair of the IPCC, were instrumental in recruiting scientists who would support climate alarmism.  Once that core was in place, billions of dollars in funding was directed to the IPCC process and research on the climate system and the threat of it posed.  Climate change became an industry that enriched those who embraced the notion that human activities, burning fossil fuels, was causing a climate catastrophe.

Professor Paul Romer of NYU made an insightful observation about the failure of a scientific field that relies on mathematical modeling.  Although he was referring to macroeconomics, his comments are equally as applicable to climate science. “Because guidance from authority can align the efforts of many researchers, conformity to the facts is no longer needed as a coordinating device. As a result, if facts disconfirm the officially sanctioned theoretical vision, they are subordinated. Eventually, evidence stops being relevant. Progress in the field is judged by the purity of its mathematical theories, as determined by the authorities.”

That represents the Group Think phenomenon, which holds that groups with common interests or purposes seek cohesion and collegiality as the expense of independent thinking and challenge.  Those who do not conform are sanctioned.  In the case of climate change they are labeled skeptics and deniers.

 

Scientific Shenanigans Equals Loss of Credibility

The CEO of the American Academy for the Advancement of Science, Rush Holt, recently said, “scientists are partly to blame for skepticism of evidence in policy making.” He was referring to a “haughty attitude has generated a backlash with the body politic against all types of scientific evidence. That is undoubtedly true but that is a very superficial explanation. The climate change debate is a case in point.

The treatment of science and the scientific process by the climate establishment is clear evidence that scientists who promote the climate orthodoxy do not have what Holt refers to as “reverence for evidence”. Their reverence is to self interest and ideology.

Homan Jenkins of the Wall Street Journal recently exposed the shenanigans that NOAA and NASA have been engaged in reporting annual temperatures. While both organizations reported that 2016 was the warmest year on record, Jenkins pointed out that this was only the case because both agencies have since 2009 left out any reference to measurement uncertainty. When error bars are included 2016 and 2015 are essentially the same as are a number of earlier years starting with 1998.

When the difference between years is less than a tenth of a degree or a few tenths of a degree, the news value of these annual reports goes to zero. Omitting any mention of measurement uncertainly is not only misleading but also a sign of what the author Darrell Huff labeled “How to Lie With Statistics”. The problem of data manipulation is not limited to the reporting of annual temperatures. Dr. John Bates, a Department of Commerce Gold Medal winner and former principal scientist at the National Climatic Data Center exposed a 2015 NOAA study that relied on unverified data and was rushed to publication to discredit the global warming pause for the purpose of influencing negotiations at climate summit in Paris.

NOAA’s statistical chicanery with temperature data is not a case of a few well meaning scientists engaging in trickery to draw public attention to an impending climate catastrophe. It is part of a well organized initiative to promote the sustainable development agenda. In 2009, the famous Climategate scandal exposed how an influential group of scientists were engaged in a conspiracy to discredit so-called skeptics, were manipulating the peer review process for self enrichment and political ends, and distorting statistical data to advance the climate orthodoxy.

Citing the “haughty attitude of scientists as the reason for a loss of credibility is analogous to blaming the sinking of the Titanic on a weak hull. The misuse of the scientific process to exploit climate change and other scientific issues will continue as long as scientists don’t pay a price for using it to pursue political agendas and self enrichment and the leadership of scientific organizations doesn’t demand integrity, openness, and respect for dissenting views

If Mr.Holt wants to improve scientific credibility, he should take the lead in promoting an initiative to establish a higher standard of excellence and transparency for scientific research and research used for policy making. In particular, since peer review has been gamed, as Climategate revealed, the peer review process needs to be reformed. Also, since science is about challenging prevailing hypotheses and theories, dissent must be promoted and protected; not demonized.

The bottom line, is that the scientific establishment needs to do a better job of policing itself and holding scientists and scientific work to the principles set by Richard Feynman and Karl Popper.

There They Go Again

The New York Times announced that according to NASA and NOAA 2016 was the warmest year on record as had been the two preceding years. Every year at this time, the media and environmental advocates make similar announcements about the prior year either being a record setter or one of the hottest on record.

By now, most people just yawn at such announcements because they have been told the same tale for so long that it has lost its meaning, as it rightfully should. Relying on their common sense, they also realize that with the exception of a few very cold or very hot days the temperature most days is what they expect. Common sense trumps the orthodoxy.

Claims of record setting temperatures and dangerous warming make good stories but don’t conform with reality. Satellite temperature measurements show no statistically significant warming since 1998. 2016, like 1998, was an El Nino year, which means it was warmer than non El Nino years. NOAA reports that the 20th century average temperature was 52 degrees F, while the average for the years between 2000 and 2015 have been 53.3 degrees F. Clearly, the 16 years prior to 2016 years were warmer than the century average but so were the 16 years starting in 1930 which was 53.2 degrees, with 1934 was 54.9 degrees, the same as last year. A difference of 0.1 degrees for comparable periods is hardly news worthy.

Differences between recent averages average and the century average is overstated for a couple of important reasons. Newer measuring devices—thermisters—that make continuous measurements measure warmer than older thermometers which took measurements twice a day. So, earlier warming was understated and those prior measurements required adjustments, which may or may not be accurate. In addition, urban and suburban development has created more heat islands than existed for most of the 20th century. While NOAA/NASA make adjustments for those two factors, those adjustments are estimates, not precise corrections.

MIT professor emeritus Richard Lindzen’s reaction to the latest report provides a clear perspective to the annual hand wringing about annual temperature changes: “To imply that a rise of temperature of a tenth of a degree is proof that the world is coming to an end — has to take one back to the dark ages.” …“As long as you can get people excited as to whether it’s a tenth of a degree warmer or cooler, then you don’t have to think, you can assume everyone who is listening to you is an idiot.”

Scientific American: Misleading And Not Informative

A January 13 article in Scientific American attempted to undermine a statement by Rex Tillerson during his confirmation hearing. In answer to a question, he said, “said “our ability to predict” the effect of increased greenhouse gas concentrations in the atmosphere “is very limited.” Scientific American asserts, “That’s not entirely accurate. Beyond defining its own interpretation of the meaning of “is very limited”, the article conflates a scientific fact with professional judgment and computer model outputs to reach a conclusion that is not valid.

Scientific American makes the point that scientists “ability to make predictions based on a particular theory corresponds to the number of times they’ve verified that theory using different lines of evidence: The more verification, the more likely it is that their predictions will turn out to be accurate. To start, scientists have verified the theory of the greenhouse effect, which says that gases like CO2 trap the sun’s heat. It then states the obvious that the warming potential of CO2 “is no longer a matter of prediction.”

There is no disagreement that CO2 is a greenhouse gas and contributes to the planet’s warming. Without it, the average temperature would be below freezing. Beyond the fact that CO2 warms the planet, there is no evidence that the professional judgment of climate scientists and advocates is a good proxy for scientific facts concerning the climate system. And, the models that predict significant warming– that has not occurred over past 20 years– include assumptions that have not been validated. That helps to explain why the models do so poorly.

Physics has established that the warming potential of CO2 is non-linear which means that the warming associated with the next increment to the atmospheric concentration of CO2 is less than the one that preceded it. For CO2 emissions to be responsible for more than half of the warming that has occurred over the past 50 years, it would be necessary for climate sensitivity to be much greater than any empirical evidence suggests is likely.

The statements made by Scientific American concerning warming over the past 50 years are based on the subjective probabilities and professional judgment of scientists who participate in the IPCC process. Scientific American would do well to explore the research foundation of Group Think as well as the work of Daniel Kahnamen and Amos Tversky who demonstrated the biases that influence even the most capable. In short, we are not as rational as we think. Michael Lewis’ most recent book The Undoing Project is a good introduction to Kahnamen and Tversky research.

Scientific American cites the high confidence of scientists that “global warming will lead to changes in the climate, including a rise in extreme weather events and sea levels. This is also no longer a matter of prediction”. Again, that statement is based on professional judgment, not established science. Carl Wunsch, one the world’s leading oceanographers, stated some years ago that sea level has been rising since the end of the last ice age, almost 20,000 years ago, and will continue to rise until the next one. The understanding of the human contribution is in its early stages because advances in measurement technology have been in place only a little over a decade.

The claims about extreme weather are pure advocacy rhetoric as has been shown by the work of Professor Roger Pielke In testimony before the U.S. House of Representatives where he made the following summary points: “There exists exceedingly little scientific support for claims found in the media and political debate that hurricanes, tornadoes, floods and drought have increased in frequency or intensity on climate timescales [periods of the 30-50 years and longer] either in the United States or globally. These conclusions are supported by a broad scientific consensus, including that recently reported by the Intergovernmental Panel on Climate Change (IPCC) in its fifth assessment report”.

Since its series of attacks on Bjorn Lomborg’s The Skeptical Environmentalist in 2002, Scientific American has continued to demonstrate that Wall Street Journal columnist James Taranto was probably correct in labeling it a “a liberal political magazine.” It’s treatment of Rex Tillerson’s comments on climate change was political journalism.

 

 

 

 

 

Who’s the Real Denier?

Climate advocates apply the pejorative term “denier” to anyone who does not genuflect at the altar of climate orthodoxy. This term is intended to discredit, not inform. But, is it a true that those who raise questions about the climate orthodoxy are really deniers?

It is not necessary to get wrapped up in a debate about climate sensitivity, solar impacts, cloud formation or other processes that influence our climate. All that is necessary is to compare predictions that have been made since the start of the climate catastrophe campaign with the empirical evidence we have today on how the climate system has actually performed.

In 1988, then senator Al Gore and NASA scientist James Hansen made a number of alarming predictions about an impending climate apocalypse. Hansen in Congressional hearings asserted, “the greenhouse warming should be clearly identifiable in the 1990s” and “the temperature changes are sufficiently large to have major impacts on people and other parts of the biosphere, as shown by computed changes in the frequency of extreme events …” Hansen, based on his climate model, predicted that by 1997 the global temperature would rise by 0.45 degrees C and by 2010 by 2 to 4 degrees. A scientist with the Climate Research Unit at the University of East Anglia went so far as to predict that within “a few years,” snowfall would become “a very rare and exciting event” in Britain. “Children just aren’t going to know what snow is.”

Senator Gore used Senate hearings to promote Hansen’s apocalyptic vision and then went on to write Earth in the Balance documenting his view that the world faced an environmental epidemic requiring that “We must make the rescue of the environment the central organizing principle for civilization.” He used Earth in the Balance to promote and fund the climate change agenda which lead to predictions about run away global warming. Those included predicting that over the next few decades up to 60 percent of Florida’s population would have to be relocated because of rising sea level. There were also predictions about increasing droughts and extreme weather events like hurricanes.

Now that almost three decades have passed since those predictions took on a life of their own, it is possible to see the extent of their accuracy.

The forecasts made by James Hansen and supported by Al Gore that global temperature would increase 0.45 degrees C by 1997 and 2 to 4 degrees by 2010 were off by a factor of 4 and 10. Indeed, since 1998 there has been no significant increase in temperature. And, while advocates proclaim that each year is one of the warmest on record, recent temperatures are not much different than those of the early decades of the 20th century.

Clearly, Al Gore exaggerated on the need to relocate 60% of Florida’s population. In fact, since 1992, according to the Congressional Research Service, global sea level rise has averaged 0.13 inches per year or about 3 inches in total. Estimates of sea level rise along the Florida coast are higher but not alarming—around 6 inches.

That leaves predictions about increasing droughts and extreme weather—hurricanes. The data tell a much different story. Hurricane frequency has declined slightly and intensity has not changed. As for droughts, Dr. Roger Pielke in Congressional testimony stated, that droughts have “for the most part, become shorter, less frequent, and cover a smaller portion of the U. S. over the last century. Globally, “there has been little change in drought over the past 60 years.”

The comedian Groucho Marx once asked, “who are you going to believe, me or your own eyes?” Climate advocates would have everyone believe them even though empirical data doesn’t support their claims. Climate skeptics deny the faux science that is the foundation of climate orthodoxy while climate advocates deny how the climate system has actually performed. So, who is the real denier? Groucho Marx provided the easiest way to answer that question.

 

 

 

 

An Act of Petulance

“All of the above” as an energy sound bite gradually morphed into actions to take coal out of the energy mix and now, on his way out the door, President Obama has issued a ban on drilling along the east coast and in the Beaufort and Chukchi seas areas of Alaska. This is an early Christmas present to environmental advocates who oppose fossil fuels simply because they exist. Based on actions and not words, President Obama only favors energy that is developed and promoted by generous subsidies.

Since almost no interest has been shown in the areas included in the Obama ban, it takes on the appearance of a poke in the eye to President-elect Trump who seems to recognize that abundant and affordable energy is an essential input to economic growth. While the provision of the OCS Lands Act has not been tested in court, it should be. No president should be able to issue a ban that persists in perpetuity without Congressional approval.

With an outlook for low to moderate crude oil prices for the foreseeable future and Shell Oil’s $7 billion experience finding no oil in the Chukchi Sea, the President’s action can only be interpreted as an act of petulance and slap in the face to the Trump Administration and petroleum industry. Self-imposed moratoria proved harmful during the period from the 1970s to the early 2000s and someday this one will also unless it is reversed. Eventually, technology and economics will make these areas appealing for exploration and production if oil and gas are found but with the ban in place, we would have to once again turn back to imports.

Claims that this action puts “environmental protection over economic uses” as the New York Times asserts is just more environmental hot air. Empirical evidence has no role when ideology drives the news. The record of offshore exploration and production over almost 50 years shows that it is possible to pursue and achieve both.

The President has received gushing praise from environmental groups like Greenpeace, which itself is telling. Although his economic achievements have been anemic at best—the slowest economic growth of any president since President Eisenhower, he goes out an environmental hero.  Quite a legacy!

Unabashed Scientific Bias

Scientific American, which is supposed to be a well respected journal, has published an open letter to President-Elect Trump on climate change. The first sentence of the introduction to the letter shows blatant editorial bias with the following, “and appointed climate deniers with ties to the fossil fuel industry to his transition team and Cabinet.”   The word “denier” is clearly pejorative and completely wrong. Scientific American also implies that the “fossil fuel industry” is a monolith that denies the existence of climate change.

No one who has been involved in first the global warming debate that morphed into climate change denies that climate change is real and is happening and always had. Scientific American is supporting a political agenda that makes its name an oxymoron. It is neither being scientific nor American.

The 800 signatories to the letter urge the President-Elect to take a set of climate related actions. In doing so, they reveal a breathtaking level of ignorance and an addiction to feeding at the federal trough.

They want to make America “ a clean energy leader” by increasing subsidies for wind and solar, ignoring the fact that these subsidies simply breed crony capitalism. EU nations that have bet heavily on wind and solar have paid a heavy economic penalty and still have to rely on coal or natural gas when the sun doesn’t shine and the wind doesn’t blow.

They want to reduce carbon pollution and dependence on fossil fuels. They are blinded by the fact that carbon intensity has been declining for decades and will continue to do so. While Americans might dream of perpetual motion automobiles, their interest in electric vehicles is tied to subsidies, which Elon Musk champions to further enrich himself. As for “pollution”, they just ignore that air quality continues to improve year in and year out.

They call for a public acknowledgement that ‘climate change is real. human caused, and urgent threat.” Human causality and urgency are artifacts of complex computer models that have been built to support a preconceived conclusion. Going back to the late 80s, Al Gore and Jim Hansen predicted a climate apocalypse caused by rapidly rising temperatures. The apocalypse keeps receding as dooms day approaches. And, the temperature increases over recent decades are not much different than those that took place early in the 2oth century. Satellite measurements continue to show that global temperatures are not rapidly rising.

In a display of bold hubris they ask for protection of “scientific integrity in policymaking.” The abuse of the scientific process over the past eight years by the Obama Administration, especially EPA makes it clear that these 800 individuals either don’t know what they are talking about or hold a perverted view of what the scientific process is.

They want to see an enhancement of “America’s climate preparedness and resilience, which clearly makes sense but their justification is the false narrative about increasing frequency and severity of extreme weather events. Improved preparedness and resilience come from investments in science and engineering that lead to innovation. Investment in basic research trumps deductive research.

Over the course of this year, a great deal of attention has been given to the proliferation of fake news. The publication of this letter adds to the inventory of fake news. There is nothing in the Scientific American article or the letter from scientists that can withstand close scrutiny. It is another example of what the late historian Daniel Boorstin documented over 50 years ago in his book, The Image: A Guide to Pseudo Events in America.

The Resurrection of Peak Oil

For decades there was a widespread belief that peak oil was just around the corner. This belief was based on the work of the world reknown geologist, King Hubbert. Although, there were a large number of skeptics, “Hubbert’s Curve” carried the day in the policy world. That is until horizontal drilling and hydrological fracturing unleashed the potential of shale oil.

While peak oil production can rest in peace, peak oil has returned in the form of a growing view that peak oil demand is just around the corner. A recent article in the Wall Street Journal—November 27—focused on the coming peak in demand. In the 1970s, Saudi oil minister, Sheikh Zaki Yamani made an insightful prediction, “the stone age did not end for lack of stone and the Oil Age will end long before the world runs out of oil.” His prediction was based on economics and a long view of technology. What he did not adequately factor into his analysis was the heavy hand of government.

The Wall Street Journal article draws heavily on the views of European oil companies, Hungary’s MOL Group, BP, and Shell. Shell’s finance chief sees the peak coming in 5-15 years. The views of these companies are not surprising because the EU has been pursuing an aggressive green agenda that has contributed to its economic stagnation and high unemployment and companies in those countries dare not stray too far from government orthodoxy. A more neutral source, the International Energy Agency forecasts that consumption will continue to rise for decades unless governments become even more aggressive in mandating climate change actions, which means technology forcing.

There is little evidence that technology forcing works in the long run because commercialization is achieved at a very high cost. Look no further than the string of failures over the past 8 years in battery technology companies and the subsidies needed for electric vehicles. To illustrate this point, the chief financial officer of BMW recently gave a downbeat outlook for electric cars, according to Bloomberg. He said, “We’ve learned that people aren’t prepared to pay a higher price for an electric vehicle. I don’t see some kind of disruptive element coming from electric cars that would prompt sales to go up quickly in the next five to six years.” The problem is likely worse than that. A 2015 MIT Technology Review article candidly stated the problem with achieving EV goals is that we still don’t understand battery technology.

Economic history suggests that there are limits to how long nations can sacrifice economic growth and better standards of living in pursuit of illusory environmental objectives. Predictions of a climate apocalypse that were supposed to be evident over the last decade have not occurred and the IPCC keeps reducing the effects of doubling CO2. Where it use to give its “best” estimate, it now gives none. Doomsayers may eventually be proven right but right now the climate system is not cooperating and as a result the public is likely to become more skeptical and aware that it has been bamboozled by environmental advocates who have profited from marketing fear.

For the foreseeable future, oil will continue its dominant transportation role because it is abundant, affordable, and has superior energy density. Its competitors maintain their life support through subsidies. Those should be on the hit list of actions to take to stimulate economic growth. The reaction of the stock market since the election is one piece of evidence that consumers and business are fed up with being over governed by the Obama Administration. If the market is allowed to determine oil’s long term future its peak will be like the horizon: it recedes as we approach it.

 

 

 

 

The Bludgeoning Visible Hand

President-elect Trump’s intervention in the Carrier relocation decision and what might not be a not so subtle threat to Boeing should deeply trouble anyone or any business that believes in the benefits of market forces, small government, freedom, and who opposes crony capitalism.

In the absence of more information on both  incidents, there could be justifiable reasons for extending the benefit of the doubt. In the case of Carrier, and its parent United Technology, the decision not to move its plant to Mexico could have been based on an expectation of prompt action on corporate tax reform, a tax holiday, and regulatory relief. In Boeing’s case, $4 billion for a new Air Force1 fleet is certainly reason to publicly call for its cancellation, although it now turns out that the $4billion figure is bogus. However, it also could have been a warning to Boeing, which has an agreement to build aircraft in China. The president-elect’s use of words such as “consequences” and “retribution” make it harder to suspend disbelief however.

If Mr. Trump is that aggressive in attacking any company that even thinks about relocating outside the US, before his inauguration, what is he likely to do when he can bring the full force of the federal government to bear?

When President Kennedy publicly chastised the US Steel  in 1961, his brother unleashed the power of the Justice Department against steel companies. And, we know how Richard Nixon engaged in a range of abuses against perceived enemies. Since Mr. Trump has given every indication that he intends to be an interventionist when it comes to US manufacturing abroad, what kind of actions is he willing to take to achieve his objective? Words have meaning and his are troubling.

Mr. Trump promised to “drain the swamp” but actions that make the federal government and executive branch more powerful and promote crony capitalism will have just the opposite effect. Corporations have a fiduciary duty to act in the best interest of their share-holders; not government officials or in this case the president-elect. In recent decades, laws and regulations have been written to benefit the favored and by extension to disadvantage competitors. A smaller and less intrusive government will only come about when crony capitalism and the Bootlegger and Baptist combinations are part of a real swamp draining.

If the business community and the organizations that represent it sit idly by while corporations are threatened and intimidated as Mr. Trump has done, they will encourage more such treatment and that will have wide ranging negative consequences. When the business community was considering whether to oppose President Clinton’s BTU tax early in 1992, a democrat strategist offered this advice: “ if you let them roll you early, they will roll you often”. The business community was unified in opposing the BTU tax and won. If President-elect Trump can roll corporations before he is inaugurated, he will roll them often afterwards. There is a choice to be made and the longer it is delayed, the harder it will be to do the right thing.

The Business Roundtable, Chamber of Commerce, National Association of Manufacturers, and others should take a firm stand against White House intervention in corporate decision making, especially where business investments are concerned. In doing this, they also should stress full support for actions that strengthen the economy and enhance global competitiveness.

The old adage of do the right thing and let the chips fall where they may is sound advice right now.

Charlie Brown, Lucy, and OPEC

The reaction of oil markets, the trade press, and some analysts to last week’s OPEC agreement is reminiscent of the Charlie Brown and Lucy.  Lucy keeps telling Charlie that she won’t pull the football away when he goes to kick it but does repeatedly. And. good old Charlie keeps trusting, when he at a minimum should be skeptical just as the trade press and others should be..

After OPEC agreed to reduce production by 1.2 million barrels per day, prices rose by 10% and the trade press and some analysts wrote that OPEC was reasserting its control and that reports of its demise were premature.   Oil analysts and historian, Daniel Yergin said, “The member countries were faced with a “very deep” abyss of low oil prices, and that won out over politics. …OPEC is back in business … This will rank as one of their historic decisions.”

Well, maybe. History, however, is not reassuring. Since the first oil embargo in 1973, OPEC has mainly been a price taker; not a price maker. Agreements to cap or reduce production have failed because OPEC lacks an enforcement mechanism and members have a strong incentive to cheat. That is likely to be the case with this agreement. Saudi Arabia and Iran came to an agreement, which had eluded them in the past, that allows Iran to increase production by 909,000 barrels a day as it tries to rebuild its economy after the end of Western Sanctions. Why should Iran stop at 90,000 barrels once its oil infrastructure is rebuilt? Why should Venezuela, an economic basket case, or Iraq honor the agreement’s limits? Russia, which produces about 10.32 million barrels a day has agreed to cut production 300,000 barrels. But, Russia’s economy and adventurism needs more hard currency, so if prices rise it too will have an incentive to cheat.

If prices rise above $50 a barrel, OPEC members will see their revenue increase, which is their goal, but that increase will create an incentive to try for more. Hence, more cheating.

As prices go up, more US production, especially shale, will come back on line and that will have the effect of offsetting OPEC production cuts. In 1973, OPEC produced 54% of the world’s production. Today, it is down to 42% and only Saudi Arabia and Iraq are among the top five global producers, according to Statista. If most OPEC members, especially Saudi Arabia honor this agreement, US oil producers will owe them a big thank you.