TOD POLL: Where will crude oil close 1 year from now (12/31/2008)?
Posted by Nate Hagens on December 30, 2007 - 11:39am
Topic: Alternative energy
Tags: 2008 oil poll, bragging rights, crude oil futures [list all tags]
2007 witnessed a rally from $67 to $99 - we have one more day to kiss $100 on the price of front month crude - it may be close. Here is a POLL, open until Jan 1, where you can post your prediction for oils closing price for year end 2008. As previously discussed, sometimes the shape of the chart, chronological movement, and volatility can tell more of the underlying story than a closing price. Here we are asking just for the price, 12/31/2008.
Click to Enlarge
Here is the POLL. Here are the choices:
1) Below $50
2) $50-$65
3) $65-$80
4) $80-$95
5) $95-$110
6)$110-$130
7)$130-$180
8)Above $180
9)I have no freakin' idea. Futures distribution centers on $90, so thats more likely than anything else.
Discuss, debate, predict, and happy new year!
I think it's really difficult to make this prediction. On the one hand, increasing scarcity should push oil prices up. The declining US dollar also tends to inflate oil prices. A steep rise in oil prices seems like a no brainer.
However, the collapsing US economy could push oil prices down. Furthermore, the European and Asian economies could also follow the same path, because European and Asian central banks bought so much bad debt from the USA. We could be looking at at 1930s style worldwide depression. That should be bearish for oil prices.
But then again, it depends on how much the countries around the world are willing to crank up the printing presses in a desperate attempt to print their way out of a debt crisis. Look at some of the recent currency collapses we've seen: the 1994 Mexican peso crisis, the 1997 Asian financial crisis, and the 1999-2002 Argentina economic crisis. In these three cases, we saw currencies collapse, which inflated other prices (like oil and gold) if priced in pesos or Korean won, for example.
So, I hate to say it, but I just don't know what oil will cost a year from now. I can't even say if it will be more ore less than it is now. I hope that gold goes up, since I'm heavily invested in it, but I'm not even certain about that.
regards,
Oz
Ditto Oz, The variables seem to get greater each year. I think the printing presses will win out, however, and desperation to keep the status quo will push prices of everything much higher before depression reins in. I vote for over $150.
This is going to be a tough call. Economic slowdown in the US seems almost guaranteed. But supplies are so tight and geopolitical events so numerous I have to think it's going to stay fairly flat if not go up a little.
What Oz said, seasoned with a fear that we're due for one of the potential disasters itemized by shargash, puts me in the $130-$180 camp. Absent a disaster $90 sounds about right for recessionary 2008.
My guess is that we'll end the year with $150 oil. There will be more dollar depreciation. Right now, the only one's financing the US 600B current account deficit is central bankers. A good chunk of that is for oil and it isn't going away without a much lower dollar. There really isn't any resolution to this crisis without a lower dollar.
Add to that the idea that total liquids could be down again this year and you have an environment for higher prices worldwide not just in the dollar zone.
So, for me the instability in the US economy will serve to increase prices not decrease them. So, people walk away from their McMansion and default on their mortgage. They still have to drive to work. Sure, 25% unemployment a la the Great Depression would reduce crude demand a little but Ben Bernanke has stated that he is not going to allow that. One million USD in each home debtor's bank account and all problems are solved--to the detriment of dollar holders worldwide.
So, $150 would be my guess.
Can't tell if you're joking. How exactly will Bernanke transfer dollars into the average home owner's bank account? As the dollar drops in value 50%, my estimate would be the ave union member might get a 4% raise (published CPI)-non union members might be a nominal decrease (down more than 50% in real dollars).
I don't think it will work out that way. The problem is that as defaults start rippling through the financial system, the amount of economically effective money is going to decline. With fractional reserve, new lending means new money created---and hence defaults on loans means money is destroyed.
The central banks will attempt to counteract that effect, but they will not be able to fully do so because the private banks themselves will be unwilling to use their new reserves to lend since their own situations will be so dire.
I don't see gold going up in this environment.
Previous currency crises (Mexico, Argentina) occurred when debt was issued in different currency than the home currency, and with Argentina, they tried to keep a farcical currency peg.
This isn't likely to happen in the developed world: US banks made loans in USD, UK banks made loans in GBP and Euro banks in Euros.
I agree. This is going to be a tough year to make a guess. To many conflicting forces. I opened the link to say that, and everyone had beat me to it.
So I decided to use my amazing psychic gut! It works kind of like Socrates daemon.
http://en.wikipedia.org/wiki/Daemon_(mythology)
My gut says wild volatility with it plunging as low as 80 and as high as 130, but settling back to about 100.
So I guess my guess is: 5) $95-$110
I voted yesterday. Today I wanted to see what the totals are since then, but the poll won't let me look unless I vote again. Won't this skew the results?
It seems I remember there being discussions of 2008 seeing quite a bit of oil come on line compared to recent years. Also, the recession should be kicking in good by mid-year, and OPEC is supposedly picking up production.
All that is balanced by decline rates and growth in China, India and oil producing nations.
I voted for 80 - 95, or whatever it was, but I'd not be surprised by any range. Volatility should be the hallmark of peak, so anything goes.
Cheers
PS. Happy New Year! We just had ours here in East Asia.
Oz,
your comment reminds me so much of the following:
(From 'The Princess Bride', in case you hadn't guessed :-) )
Inconceivable!
AKH
From here:
http://financialsense.com/fsu/editorials/lalani/2007/1228.html
I think that is the best one-line summary I've seen yet for what to expect.
Energy is essential. McMansions are not.
I would have liked to have one more category in the poll. The $130 to $180 bucket is a bit broad, so you will pick up quite a few folks in it. I'm guessing around $150 at end of year (but that depends on so very many things). I'm expecting an average of $110, with perhaps a spike to near $200 and a dip to perhaps $75. LOTS of volatility.
#7 $130 to $180. Nice broad range. Since production has been flat in the face of growing demand for 3 years now, some thing has to give. Stocks are being drawn down, and the poor have already tightened their belts. Now the big guys get to bid against each other, and since we have outsourced most of our heavy industry, a US recession will not cut demand very much. After all, we need to feed those big screen TVs and our internet servers.
Like Oz, I'm all over the place on this one. I do think there will be a world-wide recession, but I don't think it will have a dramatic downward effect on oil prices, because the decline in consumption will be roughly the same as the decline in production caused by depletion. And if prices decline much from where they are, some of the more expensive production will come offline, and the capital investment needed to bring new production online will be delayed.
On the other hand, there are some possible events that could push prices very much higher than $130. Taken individually, none of them are likely to happen in 2008, but taken in the aggregate, I think there is a pretty good chance one or more will happen:
-- War in the Middle East (beyond what we have currently)
-- Civil war in an oil producing country
-- Pakistan losing one or more nukes
-- Natural disaster(s) in oil producing regions (e.g. bad hurricane season
-- Saudis admit (or cannot hide) that Gahwar is in decline
I think if I'm wrong, I'm likely to be wrong on the low side.
#6 $110 - $130...oil prices seem to have dipped during the last quarter of last year and this year, due to mild winters and thus lower demand. So, looking into my crystal ball, I anticipate dollar depreciation and firm summer demand spiking oil up over $130 sometime during the year, then a seasonal dip down less than $130 by the end of the year.
$92.50 is my bet for this time next year, but we may see $120 before then.
Any particular reason for forecasting a closing price lower than today's? As stocks have been drawn down for two years (according to EIA numbers), if this continues the only way for prices is up. Unless there is significant new production, above depletion, or unless there is significant lowering of demand. If these factors are not spot on, in terms of moderating demand or increasing supply just enough, I can't see prices being roughly where they are now, except as a point on a wildly fluctuating curve.
Prices have risen 60% this year, when there hasn't been any really bad geopolitical news, though the US dollar has slumped somewhat. I can't imagine next year will be any more supportive of a stable oil price.
In terms of effects on people, I think only significant new production, that is, an increase over today's production of around 2 mbpd, would keep the world stumbing along as "normal". I don't expect that, but who knows?
2007 is ending on a price high and so I'm guessing 2008 may not. I think the price trend will stay intact but am simply guessing that the end of 2008 will see prices off highs reached during the year.
Well Euan, last time I won a bet I had a lot more hair and a lot less wasteline...
But 90- 110 seems fair. So 100.01 USD / bbl on 31/12/08
Why?
If the Western Industrial economies tank, the usual madness in the middle east will offset it, keeping prices high.
And of course Russia has learnt that a) high oil prices mean luxury goods and b) oil is a potent weapon.
I reckon on about 2 years of plateau pricing as western industrial economies try to cope and mitigate, cooling down, belt tightening,etc. But before the markets finally realise that Oil output cannot grow.
Then the shit hits the fan ultimately when we wonder where all the rich tourists are for the Olympics in 2012.
Mudlogger - I too suffer from expanding waistline syndrome. I can't wait for the 2012 Olympics. I suspect that infrastructure may be the first ever built on hot air power.
Have a good one Mudlogger!
You too Euan, have a good one.
best wishes to you and to all at TOD in 2008.
Decline in housing sector of economy plus high energy prices will sap spending power of the consumer and send US into severe recession by year's end.
Inflation of 8 to 10 percent will add to this straining of personal and business budgets to make recovery difficult for the next two years. As unemployment grows to around 8 percent or slightly higher, transportation fuel use will decline by the same percentage. This will cause oil use in the US to decline by at least 6 percent by year end (75% of oil is for transport in US). The balance of the world's developed economies will not feel as much pain, but they will not be growing much either. So world demand for oil will remain in balance (barely) with supply and price at year end will be below or near what it is now.
If a major political or military event occurs in the Mid East, price will be higher than now.
"as unemployment grows to around 8%" I got a thought on that I maybe wrong but there are already stories about illegals headed home from lack of jobs to cost of living increasing in the US with the weak dollar.And with a weak dollar less spending power for the money sent home.But as US citizens lose jobs TPTB will really crack down on illegals to open up jobs for US citizens.Along with a hostile view by those that employee illegals.
Please take a moment to review the Best of The Oil Drum Index and reply here with your favorite articles that I've missed.
http://www.inspiringgreenleadership.com/blog/aangel/oil-drum-best-index
Andre'
------------------------------------
Peak Oil, Climate Change and Business
Free, Bi-Weekly Executive Briefing
www.inspiringgreenleadership.com/peak-oil-climate-change-and-business
In current US$ the price will be down a lot as I believe the world econmy is going to turn down a lot this year and sooner too. Before that the price will shoot up. On the volatility poll I called for max 130 and low around 70. If it is only WTI on NYMEX then it will stay much higher in inflated dollars but the world wide justified price will drop.
Does anyone have the data (and a graph) relating price to cost of production. I can't recall where and when I last saw that but think it will be a more important issue when the global economy goes.
The only question in my mind is "exponential or asymtotic?".
Up. It will go up.
Ultimately you're probably right (that it will only go up), but a worldwide depression will lower prices and could lull us into thinking we don't have a problem.
A worldwide depression will also remove much of the cash that could be used for the transition.
Andre'
------------------------------------
Peak Oil, Climate Change and Business
Free, Bi-Weekly Executive Briefing
www.inspiringgreenleadership.com/peak-oil-climate-change-and-business
I expect a price increase of 25% by the end of 2008, but other measures are important. Oil will end the year at $125/bbl, 79 euros/bbl, 10bbl/gold oz. US headline inflation will have run at 18% from today to the end of next year.
I expect the coming year will be one of the most tumultuous we have experienced, and the following scenario is how I reached my conclusion on the price of oil. Sorry for the lack of links, but this is a compendium of thoughts found throughout TOD and Calculated Risk.
Oil begins 2008 at $100/bbl, 69 euros/bbl, 8.5bbl/gold oz. By mid-spring major banks, insurers, and lenders will race each other to bankruptcy. Gasoline will cost an average of $4.49 at the pump, and housing prices will have fallen an average of 22% around the country, 40% in California and Florida. Headline inflation will run at least 12% while the government claims core inflation is only 4.0%.
Durham, NC, will officially run out of water. Other municipalities throughout Alabama, Georgia, and the Carolinas will suffer similar fates. Fires will spread throughout the bone-dry forests and into the suburbs, and the firemen will have no water with which to fight. A mass migration will begin from the smoke-covered drought-stricken area to the rest of the country. Tent cities and soup kitchens will appear in open land from Florida to Maine and throughout the Mississippi River Valley, and local authorities will have difficulty coping with the load. FEMA and the military will be hard-pressed to provide rations and water for the refugees.
By mid-year the equity markets will have fallen 50%. Debt write-downs in the US at this point will total over $1.2 trillion, and credit will be mostly unavailable. The tech sector will see their orders dry up. The southern half of the country will continue to suffer through severe droughts, and dust bowl conditions will develop in New Mexico and the Texas panhandle.
In August the party conventions will select their candidates, but neither party will have a strong plank advocating direct action about the climate or energy crisis, focusing instead on impeachment issues, how to handle the situation in the Middle East, control of immigration, and most importantly what must be done to maintain the US good way of life. The Republican convention will be especially contentious, and the Social Conservatives may well join the Neo-Cons to form a hard-right coalition and splinter the party.
A category 5 hurricane will form in the Gulf of Mexico south of Houston and rip through the US oil and gas production fields in the Gulf. The eye will wrap around to head northeast across New Orleans and stall over Alabama and Georgia, ending the widespread drought with drenching rains that fill the reservoirs to over-flowing and flood the rivers throughout the South-East. Casualties will be low because 70% of the population have left the area.
Unemployment in the US will reach 7.5% in the fall, and the GDP growth will be negative. The rest of the world will suffer more and more of an economic downturn as US imports fall to 70% of their previous levels. Energy demand destruction around the world will take hold but not enough to match the drop in supplies, and the oil price will not drop. As food prices climb the number of starving people in the world will treble to 2.4 billion by the end of 2008.
After the Democrats win a landslide in the elections, the lame-duck President will order the withdrawal of troops from Iraq. Iraq's national government will divide itself into three regions, and those regions will begin to mobilize troops and weapons. The Saudis will send troops to Sunni-Land, and Iran will send troops to Basra and Shia-Land. The Kurds will ask Turkey and the US for protection in return for access to their oil, but the Saudis will move into the area and take both Turkey and the Kurds under their “wing.”
Oil will end the year at $125/bbl, 79 euros/bbl, 10bbl/gold oz. US headline inflation will have run at 18% year to year.
I surely hope I am wrong and am blowing smoke with no fire. But there are so many things that are near tipping points, and I just don't see the leadership available to address all these problems.
That's why I am keeping my footprint small and my profile low.
Sam Penny
the Prudent RVer
Worst case scenario - it would take several years to play out. Events seem to unfold in slow motion. I've been bugging friends about the subprime mess for at least a year.
Come on now, Sam. Don't hedge your bets. Tell us what you really think...
SubKommander Dred
...you forgot to add the bit where Superman comes and mends it all...
I'm not saying some of this stuff won't happen but I'm with the poster above, the timeframe is wrong.
5) $95-$110 (a battle between recessionary forces and dwindling supply: we are still in Phase1 of this so not a huge impact)
Nick.
I have a feeling this thread may get quite interesting, hehe.
EOY 2008? Front month close $130 to $140 I believe. We may well see that $140 by May or June. Refiners are about as tight as they can be on margins already, they will have to pass costs on, if for no other reason than to keep throughput at a level they can keep up with. Gas will probably be near $4/gallon I would think.
At the risk of being repetitive, I do not believe this is a refinery capacity problem, but one of supply.
Assuming the system holds together the rest of the year should be similar chart-wise to this year. Dip then Consolidation phase followed by return to highs near EOY.
An earmark of a tight resource situation is increased volitility. This is totally hidden by the headline chart, but nevertheless it should worsen as supply tightens further.
The only way I see to avert this is to have a bigger player have some problems and drastically curtail demand. So far only small players have dropped out of the demand side.
Of course if something happens like an excessive water carry-over in Ghawar that the Saudis can't hide then forget this low-ball estimate, lol.
I agree a U.S. slowdown seems more and more certain and should affect demand. But I don't think it will happen fast enough to hurt demand to the point where it will ease the crude price substantially. World demand vs. probable failure to keep ahead of production slippage should keep the pressure on price.
So many factors, assuming the big ones stay on their present course, the price will have to go up considerably to maintain balance.
Hmmm. How about exactly $100.00 for all US domestic oil, legislatively capped at that level after a fast rise towards $200, to discourage 'speculation' and 'keep gasoline affordable'. This is the sort of bonehead move which might pass for action in the USA, and it is supported by the fact that it would make all my call options worthless. Black market rates a good deal higher. Subsidies and tax breaks for oil exploration significant but too complicated for anyone but posters to this website to calculate actual price.
International exported oil increasingly price-irrelevant as buyer and seller trade more in geopolitical extortion/exchange of leverage than pure fiscal terms. Real terms increasingly kept secret.
I don't BELIEVE this, just goofin' around. we shall see.
I think you got it right. And after that, we'll start to use the Carter gas coupons that are currently sitting in the salt caverns in Kansas.
The dark green arrow. That is, 120 or a bit more, 130, which inches into the top category.
Producers will keep up their stuff, they like to be paid and reassure. The recession will hit the poor; demand destruction so-called will not occur. So barring wild movements in the month/weeks at end 2008, slowly rising price, set to continue. About 130 or a bit less or more.
$130-$180, based purely on how much oil has risen in a fairly quiet geopolitical and weather year (as regards oil production and processing). A 35% rise next year would be modest by this year's standards.
Could not agree more. I can recall just this year how we saw the floor go from $60, $70 to $80 and it now it appears to be pretty well stuck at $90.
IMO the only thing holding it back is the dreaded $100 psychological barrier as soon as we puncture — sometime in the next couple of months — that it's off to the races.
I wouldn't be a bit surprised to see $130-150 come mid May or June. People are waking up to the fact that we are at peak. Meaning we will be pricing for the first time at the margin. God forbid we start pricing oil for what it's worth. ;)
And don't get me going about demand destruction. If we aren't buying oil ChinaIndia will have no problem soaking up the extra barrels nevermind the fact that there is plenty of inelastic use here in the US.
those "couple of months" sure passed quickly ...
I have to say #9
A lot depends on what the U$S does and how the elections go.
"A lot depends on what the U$S does..."
This is a really good point as more and more countries and other entities are switching to the Euro, a collapse of the dollar is becoming a real threat. Probability of this is growing by the day. Oil in dollars would then go through the roof. How far are we from that ?
7)
I have no rational reason other then the news has been slowly bad for a long time and I "feel" it will get much worse very quickly
The US dollar is likely to fall in value at least 10%. Too many dollars in China and Japan to allow a precipitous fall, and the dollar has a good US, Canadian, and Iraqi oil asset backing. Paradoxically, the falling US dollar increases the value of the asset backing of the dollar. There is a fundemental asset value behind the dollar.
Q1, the "reef fish" of the financial markets flash this way and that as the US debt debacle is exposed to public view, and the adjusting dollar result in oil price adjusting to $US110.
Gold commences a rapid return to its longer term average of around 15 barrels of oil (about $US1500).
Q2, life goes on as normal, panic abates, oil prices fall to $90 +/-
Q3, Olympic mania, positive 'sentiment' regional fuel shortfalls in Eurasia (especially diesel), better 'other liquids supply', then, on historical precedent a hurricane in the Gulf of Mexico locking in a Mexican or US oil for anything from several weeks to several months.
Q4, Following the oil 'shut in' price peaks, Eurasian demand, Southeast Asian sweet hitting $120 due to demand/shipping costs, Saudi bilateral 'close-ins' with preferred partners with gold backed currencies (Russia, Germany, China starting) steep declines in Canterell production, Saudis drop production to 'milk' the price, USA decimated service sector drops consumption, USA manufacturers start to get legs, China manufacturing in dire straits and demand growth cut off at the knees, year ends around $US115.
Q1 2009 - genuine demand destruction across the globe due to recession and price, oil starts to slide toward $US85. (soon to be revers