Why the Oil Price Matters
Knowing the future price of oil is important for countless people and for countless reasons. As an individual, if you knew the oil price 5 years from now, you’d have a key piece of information regarding food prices, travel costs, and even the stock market. Many companies are directly affected by oil price and all companies are indirectly affected. Moreover, a select group of countries derive most of their GDP from selling oil. They need solid predictions so that they can, for example, know how many British tanks they can afford.
On a personal level, the future of the oil price affects me directly because the higher the price, the more young people visit my website ranking the best Petroleum Engineering schools.
The State of Oil Price Predictions
So with trillions of dollars on the line, you’d think there would be many thousands of brainiacs forecasting the price of oil to within a nanodollar. Alas, this isn’t so. Look at the graphic below from Roland Berger.
It shows what countries expected the oil price to be in 2015 and how wrong they were. Half of them were more than 100% wrong, which I didn’t even know was possible until today.
The same Roland Berger report says that companies are better at making predictions than countries, but show a range of corporate predictions (for 2016) ranging from $10 to $60. Some of them got it right, but it’s clear that these companies are not using consistent methods and at least some of them are just plain making it up.
So if companies predict better than countries, maybe individuals predict better than companies? In some cases at least, it’s true.
One analyst I found to be quite accurate was Alahdal A. Hussein, who was kind enough to publish this substandard article on his excellent website. Here’s his on-target prediction from 2015 and here’s him taking on Morgan Stanley and winning from 2016.
But on the whole I think we can agree that something is rotten in the state of predictioning. Bad news, right? Not so fast.
My great-grandfather, Otto von Bismarck, taught me that every problem is an opportunity. Given the general standard, to be one of the best forecasters in the business, you only need to be vaguely accurate. In the world of the blind, the one-eyed man is King.
And you could be that one-eyed man! Simply choose one of the prediction methods below and you can start hawking your services to the media, companies, and countries with more money than sense.
So You Wanna Become an Oil Price Expert? Here’s How.
Analysts use the following methods to predict the future price of oil.
1- Technical Chart Analysis
There’s a well-respected branch of science know as ‘chartism’ which has a fantastic record at predicting – well, anything that can be plotted on 2 axis.
What you do is plot high points on a graph in blue or green, and low points in red. This method works best if you can print the chart on paper instead of looking at a computer screen. Once you’ve done that, follow these instructions:
Hold the center of the printout right up to your nose so that the data blurs. Slowly pull the paper away until you see a vague shape behind the lines. Don’t try to focus on the shape. Instead, try to unfocus while keeping the edges of that shape in your conscious mind.
After a short period, your brain will start to perceive the hidden image and all of a sudden you will be able to see it as clear as day – the price of oil 6 months from now.
Note – if anyone asks how you came to your conclusion, tell them that you analysed the ‘head and shoulders’ versus the inverse cowgirl’ – their eyes will glaze over and they will assume you are a true Brainiac deserving of your outrageous fees.
2- The George Costanza Method (AKA The Opposite)
Chartism is fairly simple, but for some it’s still too much work. That’s where method 2 comes in. It’s ideal for getting a spot on TV as a ‘talking head’. All you do is look at at prediction from some boring, sober body and say the opposite.
If the consensus is $30, you predict $130. If the experts say $90, you say oil will soon be given away free.
Here’s a great example of that from legendary soothsayer Dan Dicker:
If you don’t want to watch the whole video here’s the summary – Mr. Dicker predicts the low oil price will force many major players out of the game, leading to consolidation and therefore $150 oil by the end of 2017. Oil’s under $48 at the moment, so there are exciting times ahead!
Note: Mr. Dicker has been making a living from predicting oil prices for 25 years.
3- Thorough, In-Depth Research Based on Expertise and Experience
Check out this article from Allen Brooks. It’s the literary equivalent of the Bayeux Tapestry: It is heavy, rich, and textured. It took 40 years to weave and it tells a story of geopolitics, petroleum product inventories, and horses and arrows. (I realize the metaphor has become somewhat strained, so I’m going to drop it now.)
Needless to say, you can’t make predictions of this quality if you aren’t literally drenched in oil every day.
Not into that? Don’t worry, the next one takes almost zero effort.
4- Cover All the Bases
With this method, you create a large number of Twitter aliases, web 2.0 accounts, or whatever. In the first, you predict that oil will go up this year, next year, and the year after. In the second you say oil will go up this year, next year, then FALL the year after.
Continue this until you have covered every single combination of events. 3 years from now you delete all the inaccurate accounts and earn fame and fortune based on your track record of 100% accurate predictions.
Conclusion
The best part of being an oil Nostradamus is that nobody really expects you to be right all the time, and almost nobody will ever check what you said 2 years ago. You’ll get paid whether you’re right or not.
So build your brand, get your name out there, and if anyone ever complains that you ruined their farm/business/nation-state, just remind them of the words of prediction expert Philip Tetlock: “The best forecasters are hovering between a dart-throwing chimp and God.”
