Most oil analysts have one goal in mind, and it’s not to be right about predicting the future prices of oil. It’s about trying especially hard not to be wrong.
The difference is important. Most analysts, including the IEA and EIA, cannot make any forecast that can be recalled months later to make them look foolish. The safest prediction you can make is always to see not much change at all, whether you see oil at $25 a barrel or $125 a barrel.
If something dramatic changes, the worst you can be accused of is not seeing what virtually everyone else has missed too – and you keep your reputation and your job.
I don’t have those restrictions, which is why you’ll get what seems like wilder predictions from me, including my continued outlook for $100 a barrel oil in 2018.
This week, we have another indication that the ‘common wisdom’ in oil is not holding up and something entirely different from what the majority of analysts are predicting is going to happen.
This interesting piece in the Wall Street Journal outlines how most of the supermajors – Exxon, Shell, Chevron and BP – have been struggling to break even in a $50 oil environment and have been pulling free cash in order to continue to pay dividends.
This runs entirely counter to the ‘common wisdom’ on the street – that the ‘new normal’ of efficiencies and cost slashing in US E+P’s has made oil profitable…