[LadyRuby]

Interesting article...

Ron Cooke: The 2006 Economic Forecast: Oil Remains a Wildcard

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I've always had a bad feeling about 2006. There are too many variables for which the data points are unknown or unknowable. From the very first time I cranked up my oil depletion model in 2003, the events of this year have exuded a bad karma. Although I have fine-tuned my model over a hundred times, the result is always the same. 2006 does not look good.

...

For 2006 and 2007, oil in the ground is not the problem. As the EIA points out, oil production capability could increase. Unfortunately, there is an alternate reality. Corporate behavior, government action, cultural stability, economics, legal agreements, geography, weather, crude oil transportation, military diplomacy and the always potent combination of religion and politics are now more important than geology in developing oil production forecasts.

...

Europeans are now on the receiving end of a very cold lesson in the dynamics of the energy market. Russia is experiencing the coldest winter it has had in 100 years (or more). So if your Putin, what do you do? Make sure your citizens are warm. Then send the natural gas that is left to your customers in other nations. Although Russia has denied it is holding back its natural gas, Italy's Industry Minister Claudio Scajola had to call a crisis meeting with energy firms to discuss natural gas shortages, and decreased gas flows have been reported in Hungary, Bosnia-Herzegovina, Ukraine, Austria, Finland and elsewhere.


...

America. If 2005 was the year Americans discovered the high price of gasoline, heating oil and propane, 2006 (or 2007) will be the year they discover oil product shortages. Chavez is a reluctant supplier. China has made a competing deal for Saudi oil. Nigerian production is questionable. Iraq is a mess. Iran's Ahmadinejad wants to hurt the infidel. And the Washington establishment is too engrossed with political bickering to establish a credible energy program.

...
In any event. 2006 just doesn't feel right. And 2007 could be worse.

[DantesPeak]

It's almost amusing that one year ago even those who actually believe in PO, such as Fadel Gheit, were so wrong about the price of oil.

Still the price of oil could fall if the economies of the world were suddenly weakened for either a political (war/terrorism), business (recession), or even natural (bird flu) reason. Otherwise, the odds favor a price of $100 for oil sometime this year.

[jdumars]

I would love to see a post that compared all of the various forum-posted predictions (PO.com users) regarding prices over the last few years with what they actually wound up being. Would someone who predicted prices reliably emerge from the pack?

[pup55]

I'm not smart enough to do any more than a guess.

The EIA has a big staff of high dollar economists and the best they can do is to predict the same price it was last year and put really wide confidence bands on it: "The price will be 65 plus or minus 15".

I agree with the project, though: maybe our "collective intelligence" will give a good estimate; get everybody to give a forecast, (high, low, average, close) for the oil price for 2006, and average them all up. The resultant answer might be pretty good.

[linlithgowoil]

no way can anyone predict the exact price of oil. i think we'll simply see it drift higher with peaks and troughs on the way.

and who knows what $100 oil would do anyway? everyone predicted collapse at $70 oil and it didnt happen.

i actually think we could cope with $100 oil for a while at least.

[backstop]

Dantes Peak -

It seems to me that a rising number of factors, starting with PO, are compounding to make oil prices steadily less predictable.

For example, while last spring's extreme GOM sea-surface temperatures did generate warnings of high hurricane development, there were no predictions of the scale or duration of economic damage received.

Which means in sum that all investment faces declining confidence in its development and operational cost forecasts, as well as in its sales forecasts.

At the point where GW starts to destabilize the Re-insurance industry, and the collateral value of assets is being nullified overnight, and where markets recognize the implacable nature of PO + GW, that investment confidence seems likely to face heavy erosion.

So how far we get this year is anyone's guess.

regards,

Backstop

[LadyRuby]

I can easily imagine the beginnings of a recession and reduced demand bringing oil prices lower (for a while). Or not? Anything could happen, it could be an interesting year.