New Scientist (14 June, p4) reports a concerning mis-use of statistical methods. It cites Richard Pike, CEO of the Royal Society of Chemistry, reporting that oil companies assume a normal distribution for each oil reservoir they find, and hence calculate a 90% certainty for its content. For multiple reservoirs, they sum the 10%iles for each, but publish this as the 10%ile for the expected total. Pike is quoted, "The figures are almost meaningless and just provide a conservative estimate for shareholders."
Since estimated reserves affect the market valuation of the companies and the futures price of the commodity, is this "lies, damned lies, and market manipulation"?
Allan Reese
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