A decade ago, many oil analysts thought $10 a barrel was the new normal. Just six months ago, when prices were just below $150, forecasters said $200 oil was not out of the question.
This year's sharp drop in crude prices from $147 a barrel in July to approximately $44 today has rattled the economies of oil exporters and prompted OPEC on December 17 to cut production by 2.2 million barrels. It has also sent oil-price forecasters scrambling to figure out what happens next.
The financial services firm Merrill Lynch says oil could dip as low as $25 a barrel next year as the global recession takes hold. Goldman Sachs, which has revised its 2009 projections three times, has a slightly more bullish outlook, forecasting that crude prices will average $45. But does anybody really know for sure?
"Look back 10 years," says Robert Ebel, a senior adviser on energy and national security at the Center for Strategic and International Studies in Washington. "What was the price in 1998? It was $11. Would you have ever suggested that the price would hit almost $150 in the summer [of 2008] and then crash down to below $50 a barrel? You would be laughed out of the room."
Analysts say a whole host of unknown factors that are independent of classic supply-and-demand calculations — from the weather, to unexpected fluctuations on the financial markets, to civil wars and major geopolitical crises — account for oil forecasters' spotty record.
Douglas Macintyre, a senior analyst for the Energy Information Administration, which provides statistics and forecasts to the U.S. government, says that while prognoses are mostly accurate during periods of stability, "the track record is fairly murky" in times of volatility.
"What we try to do is look at the global balance since oil is a global commodity," Macintyre says. "We try to look at the factors that influence either global oil supply or global oil demand. The problem is that there are a number — too many to even know — of factors that influence either supply or demand."