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Best Oil Price Forecast Of Past Decade: Jeff Rubin in 2005; Worst: Dan Yergin in 2004
Analyzing the Analysts (Part 2 of 2)
Energy Tech Stocks
As investors desperately try to keep their portfolios afloat in the wake of the global energy crisis, knowing whose oil price forecast has stood the test of time is crucial.
An analysis by EnergyTechStocks.com of the best and worst oil price forecasts of the past decade indicates that one analyst whose forecasts command a great deal of attention – Dan Yergin of Cambridge Energy Research Associates – may have made the worst forecast, while an analyst who until recently was dismissed by the media and Wall Street for his supposedly ridiculous forecasts probably made the best. As the saying goes, past performance is no guarantee of future success. But for our money, Jeff Rubin of CIBC in Canada is the analyst whose prognostications investors should follow religiously.
(10 July 2008)
Welcome to a world with $500 oil
Willem Buiter, Financial Times
How far will the real price of oil and other carbon-based resources rise? Experts (I am not one of them) differ widely in their medium-term and long-term predictions, but my reading of the evidence suggests that there is a fair chance that the sky is the limit. In the short run (the next 2 or 3 years) a global cyclical slowdown may provide some temporary relief from rising commodity prices in general and rising oil prices in particular. This temporary cyclical energy price comfort will be deeper and longer-lived if the key emerging markets that have let inflation get out of control (effectively all of them except for Brazil) tighten monetary and fiscal policies to bring inflation down to politically tolerable levels. The resulting cyclical slowdown in emerging market growth will be bad news for economic activity in the industrial world, but will put downward pressure on commodity prices. We will be unemployed but able to afford petrol.
Once global growth returns to its underlying trend, however, say three or four years from now, I expect the relentless upward march of commodity prices, including oil, gas and agricultural commodities, to continue. The reason is simple. Global demand growth is heavily biased towards energy-intensive production and consumption in emerging markets. Even if common sense breaks out in India, China (perhaps even in the Middle East and other oil and gas producers) and domestic oil and energy use is priced at its global opportunity cost, the energy-intensity of global production and demand will be rising for quite a while. At a horizon of a decade or more, high energy costs may reduce the energy intensity of production, investment and consumption, but total energy demand is still likely to rise even if global real GDP growth averages only 3 or 4 percent per annum.
With existing technology, the supply of energy from all sources appears to be quite steeply upward-sloping.
About Willem Buiter: Professor of European Political Economy, London School of Economics and Political Science; former chief economist of the EBRD, former external member of the MPC; adviser to international organisations, governments, central banks and private financial institutions.
(9 July 2008)
Follow the Oil Money
Bill George, Business Week
And it doesn’t lead to a good place. U.S. dependence on foreign oil has led to both a wealth transfer and a power transfer
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… The U.S. has had no energy policy for the past decade. We ignored the desperate need for conservation, let energy markets follow their own course, and denied the link between U.S. foreign policy and the price of oil. Instead of addressing these issues, Republicans and Democrats are locked into a decades-old argument: Should we expand supply or reduce demand through conservation? The answer is obviously both.
Beyond the Energy Stalemate
We desperately need an integrated energy policy, but the intransigence of the politicians only ensures the stalemate will continue. Instead of devising comprehensive solutions, politicians focus on finding scapegoats for the high gas prices. Is it the oil companies? The speculators? In the tradition of U.S. politics, there must be someone responsible for politicians to point to as the scapegoat.
Before we can solve these problems, we have to face economic realities about oil prices. At present, oil supplies are well balanced with worldwide demand. The increase in oil prices from the low-$50 range in January 2007, to approximately $140 per barrel today is not being driven by current supply-demand imbalances, but rather by expectations of rising demand coupled with expectations of supply limitations.
Speculators-and there are plenty of them around the globe-are simply betting that long-term imbalances will occur.
George, professor of management practice at Harvard Business School, is the author of two best-selling books, True North and Authentic Leadership. The former chairman and chief executive of Medtronic, he serves on the boards of ExxonMobil, Goldman Sachs, and Novartis.
(11 July 2008)
