Venezuela humbled me. Here’s what it reminded me about energy forecasting.
Two weeks before my Petroleum Club of Houston talk, I would have put the odds of the US president declaring we would “run” Venezuela somewhere near zero.
Then it happened.
That forced me to revisit how I grapple with uncertainty in energy analysis.
The honest truth is that most market narratives are more fragile than they appear.
We build stories supported by data. Good stories. Logical stories.
But the data rarely point to just one story. Usually there are two or three narratives equally consistent with the evidence.
The discipline I try to maintain is twofold:
❶ Hold multiple scenarios simultaneously, and be explicit about what would tell us which one is actually playing out.
❷ Be honest about when a narrative, while consistent with available evidence, is vulnerable to disruption.
Venezuela is a perfect example.
The story right now isn’t really about how Venezuelan oil production evolves from here.
It’s about the wide range of political and economic outcomes we might see in the months ahead, and what that means for any forecast built on assumptions about Venezuelan supply.
When I’m confident a narrative is robust, I’ll say so.
When I know it’s fragile, I try to be clear about that too.
Uncertainty isn’t a caveat to ignore or bury at the end of the analysis.
It’s often central to understanding what’s really happening in the market.
