Monday, February 28, 2005

There's oil down there--I think

Peak Oil Optimist has a nice dissection of the latest call to water down SEC standards for reporting oil reserves. Right now the SEC forces companies to report proven reserves. These are reserves you can pull out of the ground and sell profitably at current prices using current technology. Careful investors have always known that oil and mining companies have another category of resources called "probable." And, these investors have invested in companies that had large probable reserves with a note of caution. After Shell startled investors with big reductions in its reserves recently, it seems advisable for the watchdog for investors to continue to insist on a conservative definition of reserves. Let the savvy investors take risks on what is probable, not average Joes.

But, the real agenda it seems is to get the unsuspecting and naive involved in what is a truly risky game and thereby pump up prices for the savvy players (to sell into, naturally). It's always important to ask whose ox is getting gored.

If one of the aims (and this seems doubtful) is to assess world oil reserves for international energy planning purposes, there are better ways to do this that don't involve putting investors at risk.

(Via Flying Talking Donkey)

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