As the war in Ukraine continues to rage and the Joint Comprehensive Plan of Action (JCPOA) negotiations still are unresolved, among other critical factors, oil prices sometimes swing more than ten dollars per barrel on an intraday basis, making it impossible to provide any meaningful oil price range forecast for April. If I were to supply a range, it would be absurdly wide, which would render it useless. My expectation is that oil prices will continue to stay volatile and at elevated levels.
The war in Ukraine is devastating. All wars are horrific, of course. This war is so senseless and vicious, with women, children, the elderly, and medical personnel often being targeted. I am at a loss for words as to how I truly feel.
Like most people, I have been following Russia’s war against Ukraine. I would like to share some quick thoughts on this subject.
Arnold Schwarzenegger produced an excellent video sharing his views. Recently I have been reading a lot about negotiations and communication. Although I am certainly no expert in those fields, in my opinion, Arnold expertly delivered his message. He showed empathy for Russian people and their situation. He used past events in his personal life to show that he could relate to them. And while relating to them, he delivered the cold, hard facts about the war. His content and delivery were nothing short of masterful.
Many Russians use the Telegram app for communicating with others. Arnold Schwarzenegger has a channel in Telegram, and his video is available on that channel. See the links below:
The channel provides key highlights of the articles from the New York Times with links to the articles. Even though others may not have subscriptions, they can still obtain key information of the latest developments.
If you have Russian friends or contacts, please share the above links.
In the past, I have helped a few dozen people with their university-entrance letters. Most of those students were from Eastern Europe, so I got to know several Russians. Even now many years later, I remain in regular contact with one former student who lives in Moscow. And well over a decade ago, I helped a Russian from eastern Russia with a Microsoft Excel problem. He and I have maintained regular contact over the years. Both of these two people are kind, polite, and generous. And neither supported the war. So, please, do not assume that all Russians support the war.
I use Telegram to share news and exchange views with them.
One of my dormant hobbies—that is, I have not been active in recent times—is photography. I got to know to an outstanding photographer in Kharkiv, Ukraine by the name of Alexandra Bolotina. She has won photography awards in the US. We communicate occasionally; she is one of the most wonderful and most optimistic people I have ever met. She is truly an incredible person. Because she lives in a city that is close to the Russian border and has a large proportion of its population that is Russian speaking, I expected minimal damage. I could not have been more wrong.
Knowing how a specific person’s life has changed makes the war more personal to me. So that is why I shared a bit about her.
When you visit KharkivLife in Telegram, you will note that the language is Russian or Ukrainian. On my iPhone, I can select the Russian text and then choose to translate it to English. If is Ukrainian, then I need to copy and paste the text into my Microsoft Translator app. Both Russian and Ukrainian are used on Telegram. On my PC, I can copy the Cyrillic text, and then choose Google Translate or Microsoft Bing translator. Google allows for more text in one pass.
Here is the latest translated message that I saw:
Friends, we want to explain to you how the air alarm works.
How fast do radar units receive an alarm? And how much time do we have to hide?
A few minutes or maybe even less minutes pass between the moment of fixing the aircraft/rocket and launching the siren. In fact, this is one phone call by special communication. After that, the siren in the right regions is included by local authorities.
The alarm indicates that enemy aircraft is either approaching a certain region, which can drop bombs or missiles, or it has already been fired with a missile.
How are the cities in which the siren is included defined?
The air force records the route of the missile – approximately its course from point A to point B. Kharkiv has flown by – they turn it off, it flies further. And so step by step, this warning system operates throughout the country so that people at least have time to hide in shelter.
It is impossible to identify all threats.
However, the “oppressive majority” of our air Defence systems still see. ️The “air alarm” notification means that an enemy plane is flying, &dlquo;missile strike” means a flying missile. Most air alarms inform us exactly about the arrival of enemy aircraft. However, it should be taken into account that a cruise missile can also fly out of the plane.
It is necessary to hide in any case.
Or count on God.
Share this with your friends and subscribe to our channel.
One day, people are leading perfectly normal lives. And the next day, people are concerned about missiles launched toward them. What a cruel and unforgiving world some of us live in.
Wrapping up, here is what I would like you to take away from this post:
If you have Russian friends or contacts, please share Arnold’s video, and Financial Times and New York Times links
If interested, please see Alexandra’s photography
If appropriate, share Alexandra’s links and the Kharkiv Telegram link
Do whatever you can—even if you believe it is something small—to help foster peace and understanding
I normally provide an oil price forecast with a ten-dollar range indicating where I expect West Texas Intermediate prices to be in the upcoming month. For this month’s oil update, I am suspending my forecast.
A tweet of Kira Rudik, Ukrainian MP, holding a Kalashnikov rifle in self-defense.
The US Iran negotiations, known as the Joint Comprehensive Plan of Action (JCPOA) are reaching a critical point where a decision may be taken soon. I am not sure, though, if the current conflict in Ukraine has any bearing on these negotiations.
The Russia, Ukraine, NATO, and US conflict in Ukraine is horrific. I am unable to judge how this conflict will manifest itself in terms oil prices over the next month. There are simply too many moving parts. All I can say is that I expect oil prices to remain elevated—which is obvious to most everyone.
Because that I am Canadian with a Ukrainian last name, it should be easy to guess where I stand on the conflict. I want Ukraine to be a free and democratic country.
One of the challenges of writing about current events is that I expose my lack of historic and current knowledge. While I have read some history concerning Russia and Ukraine, I am far from an expert. I tend to follow current developments quite closely by reading several online sources and using Twitter. The reports and images are heart wrenching. When reading others’ thoughts and opinions, I check to see if I support their general views and logic. Two of Thomas L. Friedman’s latest op-eds in the New York Times resonated with me: “This Is Putin’s War. But America and NATO Aren’t Innocent Bystanders.” and “We Have Never Been Here Before.” Both op-eds require a subscription, though I believe that if you register with your email, you can read a limited numbers of articles without a subscription.
In the first op-ed, Friedman says that America and NATO all share some portion of the blame. And in the second, this conflict will be covered in social media and will affect the way we see war.
Some in the West might be inclined to demonize Russian people. That is a mistake. Like the citizens of any country, the population is not homogeneous. The Russians that I correspond with are kind, gracious, and wonderful people. They abhor war just as much as I do. So when I see war causalities—from either side—I mourn for the families that have their lost loved ones.
Seeing Ukrainians having to take up arms to defend themselves and their country breaks my heart. I have included a tweet from Kira Rudik, a member of parliament in Ukraine, which shows a picture of her holding a Kalashnikov rifle to defend herself and her country. Middle-aged people having to take up arms in self-defense in 2022 is abhorrent. Yet here we are.
No one knows how or when this conflict will get resolved. Because this is only the fifth day of the conflict, there are likely to be a few changes in shifts of momentum.
Like so many, I am upset and disappointed by these developments. I hope that because the world has become unified against this war, it gets resolved quickly.
Once there is more semblance of normalcy, I will go back to providing my forecasts.
A month ago, I forecasted West Texas Intermediate (WTI) to range between $72.50 and $82.50 per barrel for January. WTI has exceeded the upper end of my range for a substantial part of January. So for February, I am increasing my forecast by ten dollars per barrel to range between $82.50 to $92.50 per barrel.
Oil inventories remain tight and OPEC+ has not been keeping up with its pledges of 400 thousand barrel per day increases every month. As the northern hemisphere swings toward spring and summer, I expect even more pressure on oil.
As mentioned last month, Omicron is still an issue but appears to be a fading issue, and it is not likely a significant factor in looking at oil prices for next month. The Ukraine situation is a significant factor, though. I suspect that some portion of increased oil prices is the result of increased geopolitical tensions. If tensions escalate further, I expect oil prices to either remain stable or go higher. And if there is an invasion of Ukraine, I expect oil prices to rise significantly higher, perhaps to $100 per barrel. Of course, I hope an invasion does not happen. Aside from direct human suffering, there are more than enough domestic and global challenges that need to be addressed by all of us without having more divisions and distrust.
On the flip side, Iran negotiations are heating up. Should the US and Iran reach an agreement allowing Iran to export its oil, that would negatively affect oil prices, at least in the short term. Many suspect that all along Iran has been exporting significant amounts of oil to China. It is difficult to predict how much additional Iranian oil would be exported, how much the additional volumes would affect oil prices, and for how long.
In last month’s post, I mentioned that all negotiations are fraught with high degrees of uncertainty. Although many pundits opine with great certainty, I am not one of them. I do not have sufficient historical and detailed knowledge of the issues. Although I have my own personal thoughts and opinions, even I do not place much weight on them and am willing to radically revise my thoughts and opinions in a heartbeat.
I am surprised by the market turbulence apparently caused by the upcoming Fed rate increases. While I expected some movement, I thought the market would absorb the news with less volatility.
My forecasted range of $82.50 to $92.50 per barrel is premised on maintaining the status quo. If the Iranian negotiations are fruitful or Ukraine is invaded or a political compromise is reached, then my forecasted range is no longer applicable. Like everyone else, I am watching and reading as much as possible.
I recommend Steven Pinker’s book (Amazon affiliate link) Rationality: What It Is, Why It Seems Scarce, Why It Matters and give it a five-star rating.
I am going to create a fictional medical situation and ask you to estimate the odds of a person being truly sick.
Let us assume for a moment that there is a new disease where 0.5 percent of the population is afflicted with the disease. If a random person not exhibiting any symptoms tested positive using a blood test, what are the odds that that person is truly sick knowing that the blood test has the following attributes:
98 percent of the sick people being identified as sick (true positive reading)
2 percent of the sick are falsely identified as okay (false negative reading)
95 percent of the healthy people identified as healthy (true negative reading)
5 percent of the healthy people being identified as sick (false positive reading)
Remember, this test is 98 percent accurate in identifying those that are sick as being sick. The answer of how many are truly sick may surprise you: it is about 9 percent.
To determine the 9 percent answer, we need to calculate the true positive readings and the total number of positive readings, which is false positive plus true positive readings.
For illustrative purposes, let us assume a total sample population of a million people.
False positive readings are calculated as follows: total sample population times percent healthy times false positive readings or 1,000,000 times 0.995 times 0.05 = 49,750 people.
Similarly, true positive readings are calculated as follows: total sample population times percent sick times true positive reading or 1,000,000 times 0.005 times 0.98 = 4,900 people.
Total positive reading = 4,900 + 49,750 = 54,650 readings.
Then, true positive readings are divided by total positive readings or 4,900 / 54,650 to get about 9 percent.
Figure 1: Probability Tree
Please see figure 1. To enlarge the figure, click on it.
If this Bayesian theory example piqued your interest, then Rationality will be an interesting book for you to read. It discusses Bayesian theory and other similar statistical topics.
At the end of the book, Steven Pinker tells us why rationality matters. In short, if we want to progress as a society, we need to make rational choices.
I have always enjoyed these types of topics and therefore enjoyed this book and recommend it to those of you who enjoy similar topics.
As an aside, on his blog, David Epstein wrote an excellent article “Here’s How to Understand What a ‘95% Accurate’ Test Is Actually Telling You.” There, he references two good sources: one, the New York Times article “When They Warn of Rare Disorders, These Prenatal Tests Are Usually Wrong”; and two, JAMA Internal Medicine article “Medicine’s Uncomfortable Relationship With Math: Calculating Positive Predictive Value.” What is surprising is that the medical field itself has challenges with understanding Bayesian theory.
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