Excel Chart Forecasting Technique
Watch this video to see how to use Excel charts to produce quick and effective forecast trends. It uses EIA oil price data which is available here.
Download the Excel file from the video HERE.
For a more dynamic forecast that accounts for random events and seasonality see THIS article.
Excel Chart Forecasting: The Oil Price
Recently the oil industry has been going through some turmoil (see the above chart and this bbc article). This is not really new for E&P companies. But it is also not good for them because they are definitely headlong in the down-phase of a price recession. We don’t know exactly when the price will start to rebound again, but it assuredly will (I would guess around May 2015). When it does we don’t know how long it will surge upward for–but it seems like a safe bet to assume that the price will rise strongly over the long-term since global demand for oil is not diminishing and global supply is not expanding. It will probably rise enough to make even expensive (in current terms) reservoir oil ‘liftable’.
Looking at the trend since 1987, I am inclined think it will follow the blue dotted line in the chart above–not exactly of course, but in a smoothed sense. This line is a 3rd order polynomial trend forecast that shows diminishing increases as we move into the 2020’s. This oil price forecast would account for continuing price increases as we drain down the easy-to-lift stuff and global demand continues to increase; but it is also offset by a gradual increase in energy substitutes as they become more mainstream in 8+ years time.
Out of interest I have also added an exponential trend line to my chart (in the case where the rate at which demand outstrips supply turns out to be an exponential relationship over the period shown) and a linear trend (the case where the relationship between supply and demand remains constant over time).
Feel free to leave any comments you might have below.