The Oil Drum

Is it really that important?

We are talking an approximation here.

Let's assume the real world shocks are roughly evenly spread out in time, then the noise stays there, but does not affect the overall conclusion that much.

Also, whether the shocks have a relative big enough scale to matter, remains to me at least unproven.

I think the model has a lot of potential and cleaning the real world data would also have it's consequences, just as WHT points out. There have already been other methods using various ways of trying to average out the noise, perhaps introducing additional skew to the data for future extrapolation.

Modelling it with noise intact at least starts with a different premise and the results are encouraging.

However, in an ideal scenario, I think your point about trying to achieve 'perfect world' scenario is a good one.

BTW, great work WHT. Even a person like me who's getting back to physics/maths after at 15+ hiatus could follow the main gist of the article much of the time. That is quite remarkable communication and explanation powers you have!

I'll repeat a statement made a few times before. If you want to use maths to predict/understand oil production/discoveries etc. then you need to explicitly 'reverse out' the impact of political and economic decisions.

But surely you first need to know what will happen if politics is ignored? In this case the politics is a response to the inexorable mathematics of the situation, so you need to establish the mathematically "perfect" situation first.

The politics then changes the situation, but to understand what the politics will do, we need to first understand what happens without politics.

garyp, This is a great argument you make.

Yet I think you forget that any lapses in exhaustive searches by well-fed companies are more than taken up by hungry newcomers on the scene. Where there is money to be made, people will contribute to the gold rush. And greed is the essential driving force, which has to first-order never been known to abate in the history of mankind. Even at the lowest point in the value of oil, it would still be worth a fortune for the fortunate prospector.

I also think I have taken into account noise and uncertainty by the dispersive model itself. And the oil shock model adds another level of uncertainty, up to the point that shocks are used to model the step changes you talk about.

So it is in fact a bottom-up stochastic model, but then perturbed by top-down deterministic considerations.

OK.

The word "noise" is being thrown around here.

Noise IS Chaos Theory.

Data Mining using Fractals and Power Laws.

The model, therefore, only mimics power law behavior.

"...we do know that, overall, it will fit within the mathematical pattern of the power law distribution.

The interesting thing is that this mathematical relationship is found in many other seemingly unrelated parts of our world. For example, internet use has been found to fit power law distributions. There is a small number of websites that attract an extremely large number of hits (e.g. Microsoft, Google, eBay). Next there is a medium number of websites with a medium level of hits and finally, literally many millions of sites, like my own, that only attract a few hits.

The number of species and how abundant each one is in a given area of land also fits a power law. There will be a few species that are very abundant, a medium sized number of medium abundance and many species that are not very abundant."

http://complexity.orcon.net.nz/powerlaw.html

In other words, we know the largest fields have been found.

There are no others that can be accessed.