Goldman Sachs Goes Bold! Forecasts $45 Oil

Goldman, once warning of $200 oil, sees $45 in 2009 | Business | Reuters.

It looks like the analysts at Goldman Sachs have learned their lesson in hindsight in regards to their $200 oil prediction. Their new prediction is within a $1.00 of where oil is currently trading. Too bad they didn’t pick the $45 number 8 months ago!

To protect themselves further they should issue a standard deviation along with the prediction. A nice fat SD and they can claim accurate foresight no matter which way oil goes from here.

The article actually has the prediction of oil falling to $30 before recovering to average $45 for all of 2009.

A little research shows that GS predicted $200 oil within 2 years in early May when it was about $125. Oil peaked at about $150 a little over 1 month later. Contrarians might see this new prediction as a sign of soon to be rising oil prices.

Comments

[Matt Bowyer:]

VLADIMIR DLOUHY

Scandal: Czech Minister of Industry and Business Dlouhy was responsible for approving the privatization plans of all Czech enterprises following the demise of Communism. With this authority, Dlouhy “greased the wheel” so the international Mafia could pillage the Czech Republic.

Two examples:

1. Rather than allow Czech citizens to purchase shares in Vitana, one of the best food processing companies in the Czech Republic, Dlouhy sold Vitana directly to the Norwegian company Rieber and Son.

2. Dlouhy approved the privatization plan for Pilana, the internationally renowned Czech company that produces woodworking and metalworking tools. In the plan, all of Pilana’s production assets were transferred to five private companies named “Pilana XXXX”, where XXXX represented a particular product category.

To cover his dirty deeds, Dlouhy still allowed Czech citizens to purchase shares of Pilana Hulin a.s., but this particular company only included such unimportant assets as overnight accommodation services and motor vehicle maintenance.


Current Position: Dlouhy is now International Advisor to the Board of Directors for Goldman Sachs.

2008 Dec 14 07:26 AM

[bluesmoke:]

Seriously, are you still really listening to the "experts"?

2008 Dec 14 09:33 AM

[Tim Plaehn:]

Seriously not. The purpose of the article is to show how inaccurate their forecasting is.

2008 Dec 14 10:09 AM

[searcher:]

Hey, $200 oil within 2 years is still almost as credible, even now, as it was when predicted. We all know the old saw of accuracy vs. precision.

2008 Dec 14 12:04 PM

[James Powell:]

Caution is prudent. With Russia, Iran and Venezuela on the verge of econmoic collapse, at least a short term spike in oil prices is quite possible. 85% OF IRAN,S GOVERNMENT REVENUES come from oil. They will do anything to craete uncertainty and chaos to affect oil prices. Shutting down Strait of Hormuz, blowing up a couple of pipelines, buying oil tankers, cuting down on oil production ...you name it.

2008 Dec 14 01:45 PM

[Ferdinand E...:]

I didn't believe that oil was going to $200/b, but I didn't see anything wrong with that forecast, and still don't. It was a 'ceteris paribus' forecast, and if there hadn't been a macroeconomic meltdown, that price MIGHT have been possible - with the emphasis on might. This doesn't mean however that I am impressed with the forecasting abilities of GS. Quite the contrary.

Incidentally, I believe it more sensible for the new American government to plan in terms of an oil price of $200/b instead of 45, because without the meltdown mentioned above, American drivers would be experiencing the gasoline price that they are always talking about, which apparently is $5/gallon.

2008 Dec 14 01:56 PM

[CLH:]

45 dollars is a safe prediction for quite some time for oil. 145 dollars was a bubble which destroyed many investors.

2008 Dec 14 02:07 PM

[munny:]

Russia, Iran and Venezuela aren't the only at risk producers.

Mexico has declining production thanks in no small part to Cantarell collapsing, next to nothing going into exploration and a federal government that needs more petro dollars to fund its operations.

Canada conventional production is dropping and at $45/bbl, those bitumen mining operations will be negative cash flow operations.

2008 Dec 14 03:01 PM

[Abdul Kalam:]

Crude and other commodities tanking low is well intended. The primary goals being:

1) Twist arm of Iran, Russia. Let them feel more economic shock so that we can more easily bring back our troops home.

2) Provide some relief to the American household.

3) Save money on imports

SA is our ally in this even though they have to suffer in the short term.

This year, crude at 145 was more of a speculation rather than supply destruction. I see crude going to $20 or below in 2009-2010. This would cause countries like Russia, Iran, Venezuala beg fo help.

2008 Dec 14 03:44 PM

[scfranklin94:]

I can see crude oil getting into the thirties, but not the twenties. OPEC will eventually cut production and a floor will be found in either the spring or early summer. As much OPEC countries want to cheat on their quotas, there's a limit to how low they can afford to go. In 1999 when crude got down to $10, Mexico and the North Sea were producing a lot more, that's not true now. Thankfully Angola and Equatorial Guinea are picking up some of the slack, but it won't last forever. Drilling is slowly down greatly, and $40 B of investments in the tar sands are in limbo for now.
Even if our daily demand remains at 95% of 2007 forever, eventually crude oil prices will rise due to lack of the industry replacing crude oil reserves. I think that prices will start to recover next winter at the earliest or in the summer of 2010. And, once again prices will rise out of proportion to the change in the demand & supply imbalance - it's par for the course for inelastic price movements.

2008 Dec 14 05:51 PM

[Hmm?!:]

Severe correction required!!!

What the Goldman Sachs analyst really said was....... Oil will go above $135 and could spike as high as $200. Note... the COULD and SPIKE associated with $200.

He also stated if it does spike... it will drop significantly and eventually settle at around $65. The media just jumped all over and kept repeating the $200 number as done again here.

2008 Dec 15 02:17 AM