Why we're all obsessed with oil forecasts — even when they're often wrong

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Your alfresco wedding is two weeks away and you’re checking the weather forecast every hour. You reasonable keep looking over and over, as if clicking on Environment Canada’s web period 250 times will somehow fend off the threat of rain.

Your hockey consortium is tomorrow night and you are printing out stacks of stats to complement the season-preview periodicals you have pored over. Armed with up-to-date info from the maximum effort hockey minds, there’s no way you’re going to let your office colleague win the pot this year.

Endure and sports are two examples of forecasts we regularly rely on, even though they continually flounder. A “chance of showers” becomes a deluge, or the co-worker who doesn’t chaperon hockey and has never studied a stat in his life wins the office merge.

S till, we are addicted to predictions — the sales targets we’re expected to reach, the profitable outlook that promises more jobs, even the odd global doomsday revelation.

No matter the topic, we indulge.

“The truth is that forecasts are like Pringles — nobody thinks that there’s any terrific virtue in them but, offered with the fleeting pleasure of consuming them, we declare it hard to resist,” wrote author Tim Harford in the Financial Outmodes.

Too tempting

If you’re in Alberta these days, it’s hard to avoid the Pringles. The oil tch is demanding to make sense of the downturn.

“Forecasting oil is a very difficult business. If it was down-to-earth and we were able to do it with any accuracy, we would all be on a yacht in the south of France,” bid Alberta Environment Minister Shannon Phillips. The government’s fall budget prognostication oil prices at $50 US a barrel this year and $61 US in 2016-17. Currently, rates sit just above $30 US a barrel.

Even high-level executives on-going oil com nies aren’t sure where prices will go. Imperial Oil CEO Full Kruger admitted last May, “I don’t have a clue.”

Fickle merchandises

The variables involved in pinpointing the future for oil are just as complex as picking the next Stanley Cup MVP, if not varied so.

There are layers of complexity. On a global scale there are supply and call for, geopolitics and shifting energy trends. On a local or regional level one requirement consider oil transportation, price differentials, quality differentials and refinery places.

“It’s a new century, it’s new geopolitics, assumptions are turned upside down. We’re looking at volatility, trouble as well as the gain associated with world markets,” said Ed Morse, the universal head of commodities for Citi Research.

The convoluted situation represents a lean towards labyrinth of possible outcomes, which doesn’t seem to deter audiences at all.

This month, two special events with oil forecasters in Calgary have been cked, unequalled to jokes about how eager people are to hear the “good news.”

Forecasters didn’t see oil consequences crashing this badly, and yet people are flocking to these experts to sanction the new projections.

Michael Wittner, with Société Générale, explains his job as an oil forecaster1:02

Craving information

Just like in sports, the brightest minds in the enterprise get it wrong, over and over again.

“Certainty is difficult to come up with accurately now,” said Michael Wittner, the head of oil research with Société Générale, in an press conference with CBC News. “Far and away the goal is to try and get it right. Obviously, neither we nor anyone else I invent has gotten it right so far.”

At minimum, forecasters need to explain what has hit oned in the market to get us to the present time. The next step is the prediction.

FirstEnergy Choice’s Martin King seems to enjoy playing with people’s mate, hate and lust for crystal ball gazing.

His presentation at a recent Colloquium Board of Canada event was titled “Positioning for a price recovery.”

“I didn’t specifically say when the assay would recover,” he quipped to the crowd. “I’m glad I didn’t get sui generis about that.”

These types of events are information exercises, as they methodically go closed dozens of charts and graphs to tell the story of where have we been, where are we now, and where we are usual to go.

Forecasts are generally serious, since much is at stake. Oil executives are demanding to get a sense of where to set their budgets and possibly how to take advantage of a reclamation.

“Everybody is going to have their own opinion on it, of course. But it’s always proper to have more information than less,” said Prince.

ExxonMobil released its energy outlook this week, which looks 25 years down the procedure. The report forecasts that in 2040 the world will rely on oil for one-third of its animation, which is similar to current levels. (ExxonMobil)

Forecasts are always fraught with risk. Make a bold prediction, like economist Jeff Rubin occu tion for oil at $200 a barrel, and it can follow you around for years to come. But if you’re only off by a scarcely bit, you can always cover your tracks with phrases like “figures overshot to the downside.”

If the energy industry’s crystal ball gazing feels to need some work, it’s in good com ny. For instance, the Hockey Telecast, a highly respected publication, unveiled its annual NHL predictions last summer.

The Florida nthers were set for mediocrity and to bump off fifth in their division. Currently, they are first in the Atlantic. The Winnipeg Jets were predicted to have a 60 per cent chance of making the playoffs. Right now, they are basement dwellers in the Medial.

Do we blame the Hockey News for these problematic prognoses? Probably not. Uncountable of their predictions are right on the money. The variables in sports are numerous with abuses, trades and the like.

Besides, the masses will keep flocking forsake to hear the latest prophecy, the irresistible divination to make sense of where this cosmos is headed. Right or wrong, we just can’t ss it up.

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