This week we learned that oil was going to $10!
It was the latest in an endless stream of hyperbolic attention seeking predictions from investment commentators and financial institutions.
While most peoples’ true interest in the price of oil relates to how much it affects the price of filling their car, the forecasting game has become an interesting sideshow in oil over the past few months.
When oil was trading between $90-100 a barrel and seemingly steady, there seemed to be comparatively few commentaries on where it was heading next. Throw in some volatility and a dash of uncertainty, and all of a sudden a whole host of commentators come out of the wood work to throw their two cents in.
Most will be wrong (and they’ll hope you’ll forget), while a couple will be right and they’ll be hanging their hat on their right guess on oil in 2015 to get themselves more attention in the future.
Here’s a current roll call of some predictions:
Oil heading to $43, back to $70 within 12 months (then revised to a low of $30) – Goldman Sachs.
Potential to reach $200 per barrel due to lack of investment – OPEC’s Abdullah El-Badri
Oil could fall as low as $30 – Barclays
Oil bounces above $50, but we haven’t seen the bottom – UBS & Societe General SA
We’re hitting the bottom and going to $60 – Confluence Investment Management
Oil back to $100 by end 2015 – ex Shell CEO
Prices to $150-200 in 4-5 years – CEO of Italian oil giant ENI
Oil at $45 is temporary – economist for the International Energy Agency
Recent surge won’t last, could go to $20 – Citibank
Oil is going to $10 – Bloomberg columnist Gary Shilling
Oil back to $70-80 by end of 2015 – T. Boone Pickens
This is only a small sample of the predictions out there, but they include some of the bigger names making calls. To be fair there are varying timeframes suggested, but $10 to $200? This is a great illustration of the lunacy of financial predictions.
In our humble opinion (and without any oil industry experience) none of them have the slightest idea where oil is going. Their forecasts represent what they currently know and not what occurs tomorrow. And let’s not forget any possible bias, depending on what they have to sell you or what their own position is in the market!
The biggest problem with predictions is their reliance on today’s information when markets are moved by tomorrow’s events. In just the last week there has been an oil pipeline bombed in Libya and an oil refinery explosion in California. These unseen events are often what render financial predictions useless.
We only have one prediction on oil prices – with the Australian dollar recently falling and oil priced in US dollars, any rebound in oil prices will inevitably mean greater pain at the petrol pump.
You can count on that.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
