The Oil Price Enigma

Oil is the single most important commodity purchased today, and its price influences the fortunes of every nation on the planet in significant ways. Yet nobody can tell you with honesty that they know where the price is headed. Thirty years ago (and much younger then), I imagined that I could construct a model to calculate the future price of oil -- and even persuaded some others to accept this idea.  Needless to say, the price never really performed as my model had predicted, except in very general terms; it did go higher.  The experience left me with a deep appreciation of the importance of assumptions in models -- in this case, extraneous political parameters  Usefully also, I acquired a certain skepticism towards models generally. The situation then was relatively simple: There was just an OPEC monopolist and the 'rest-of-the-world' producers.  Today, the situation is much more complicated and I'm not sure I know how to predict a future price for crude...(Read Full Article)

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