Further proof that predictions are meaningless in this Bloomberg story on the yes, no, maybe saga of the Merrill Lynch (who owns them these days, we lost count) energy guru Francisco Blanch who gives forecasts that occassionally make people blanch.
Blanch changed his 2009 price forecast at least four times this year as the worst global slowdown since 2001 spreads. His most recent estimate that crude may fall to $25 came on Nov. 26. The Organization of Petroleum Exporting Countries’ 13 members meet in Oran, Algeria, tomorrow to try to stem crude’s decline.
“A shift of views from an analyst is a good thing,” said Pierre Andurand, chief investment officer at BlueGold Capital Management LLP, a London-based hedge fund that manages $1.1 billion. “It means he takes the change in economic conditions and the change in balances into account. We can’t say that for many of them.”
Well of course the more forecasts you make the higher the likelihood of at least one being correct. Blanch's claim to fame was his forecast of both $150 oil and a resultant crash. Whether that was due to erudition, luck or a gift for frequent incisive comments we don't know. We certainly agree that oil is near it's low, apologies now to Donald Trump who we mocked on 30 September when one of his ravings was for $20 oil. And we can see that oil could boomerang if the economy suddenly takes off. But the way this economy is going, even President Obama (how we love saying those words), who will have a massive psychological boost on markets, won't actually be walking on water to put everything back together again. Or maybe we're wrong, Bernie Madoff will find a few tens of billions of dollars in that suit he left at the cleaners and everything will be simultaneously dory and hunky. Who knows? Not us, but then we're not in the predicting business. And neither should anyone else. But people want to hear stories, and one of the faves has always been that the impossible (you can beat the market for example) is possible. In energy, just like most markets, people pay for this "inside" information. But what is it worth?
His $25 prediction may have received more weight than it deserved, said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts.
“Sure, if the Chinese economy gets really bad, we could go below $25,” she said. “It’s kind of like saying if the temperature drops, it will be cold outside.”
Blanch, who runs half-marathons and takes the subway to work, said the likelihood of $25 oil is less than one in three.
“The best you can do is sort of set out a number of alternatives and try to set out within your central forecast what are the risks around it and what are the alternatives,” he said. “Nobody has a crystal ball.”
Which sounds familiar from our home page About No Hot Air
We don’t have a crystal ball on what’s going to happen in energy. On the other hand, no one needs to cross our palm with silver.