The Oil Drum | TOD POLL: Where will crude oil close 1 year from now (12/31/2008)?

125 comments on TOD POLL: Where will crude oil close 1 year from now (12/31/2008)?

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ozonehole on December 30, 2007 - 12:08pm

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

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treeman on December 30, 2007 - 1:06pm

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.

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chrisale on December 30, 2007 - 1:24pm

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.

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fat_tail_rider on December 30, 2007 - 2:39pm

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.

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CLZ09 on December 31, 2007 - 3:48pm

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.

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BrianT on December 31, 2007 - 4:28pm

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).

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mbkennel on December 30, 2007 - 4:54pm

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.

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Bitteroldcoot on December 30, 2007 - 5:36pm

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

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hummingbird on December 31, 2007 - 10:23am

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?

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ccpo on December 31, 2007 - 11:36am

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.

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Not ManCon on December 31, 2007 - 3:03pm

Oz,

your comment reminds me so much of the following:

Man in Black: The battle of wits has begun. It ends when you decide and we both drink, and find out who is right, and who is dead.
Vizzini: But it's so simple! All I have to do is divine from what I know of you. Are you the sort of man who would put the poison into his own goblet, or his enemy's? Now, a clever man would put the poison into his own goblet, because he would know that only a great fool would reach for what he was given. I'm not a great fool, so I can clearly not choose the wine in front of you. But you must have known I was not a great fool; you would have counted on it, so I can clearly not choose the wine in front of me.
Man in Black: You've made your decision then?
Vizzini: Not remotely. Because iocane comes from Australia, as everyone knows. And Australia is entirely peopled with criminals. And criminals are used to having people not trust them, as you are not trusted by me. So I can clearly not choose the wine in front of you.
Man in Black: Truly you have a dizzying intellect.
Vizzini: Wait 'til I get going... where was I?
Man in Black: Australia.
Vizzini: Yes, Australia, and you must have suspected I would have known the powder's origin, so I can clearly not choose the wine in front of me.
Man in Black: You're just stalling now.
Vizzini: You'd like to think that wouldn't you? You've beaten my giant, which means you're exceptionally strong. So, you could have put the poison in your own goblet, trusting on your strength to save you. So I can clearly not choose the wine in front of you. But, you've also bested my Spaniard which means you must have studied. And in studying, you must have learned that man is mortal so you would have put the poison as far from yourself as possible, so I can clearly not choose the wine in front of me.
Man in Black: You're trying to trick me into giving away something — it won't work.

(From 'The Princess Bride', in case you hadn't guessed :-) )

Inconceivable!

AKH

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