A POLL on Oil Price Volatility for 2008

(Note: permissioning issue for poll vote should be fixed) As 2007 draws to a close, not only did we observe a large increase in oil prices (approx 50% over 2006 year end), but we had a large absolute range in prices (approx $50). As mentioned in last weeks (less precise) poll, it is likely that many divergent forces will impact oil prices in 2008 (and in different directions). Oil rallied over $2 today, apparently on news of bombing in Iraq, this time from Turkey. Below the fold is an open thread to discuss upcoming volatility (or lack thereof) on oil prices in 2008. This poll will be followed by an end of year price forecast poll later in the week. But for a holiday appetizer, let's guess the volatility for 2008. Place your vote directly in the poll and put a comment with your vote and brief explanation in the thread - winner (if female) receives a date with highly eligible bachelor Professor Goose. If male, a congratulatory pat on the back...

Price volatility can be measured several ways. The financial markets price options on futures (or stocks) and the buyers and sellers converge on a price for the options, from one which can determine the 'implied volatility' expected by the market. For example, as of this writing one can buy an option for December 2008 struck at $100 for $4.20, which is an 'implied vol' of 23% with dec 08 futures at $90.45.

Another way of measuring volatility is the total movement up and down, in absolute value, over a period (up $1, down $2, up $5, down $1.5) ,ends up having the price up $2.50, but having traversed a total distance of $9.5 -so $2.5/$9.5=26% - the higher this 'trading efficiency ratio', the more a market is trending (in either direction). The closer to zero this figure, the more the market is moving without actually 'moving' in any direction.

Finally, and most simply, we can measure actual volatility, after the fact, by taking the total range during the period, divided by the beginning price. Using last years price on the current front month WTI futures contract, we see that it started 2007 at $67, and traded as low as $57 and as high as $98, for an observed volatility of 61% (98-57)/67. It is this last number, 61%, which we will try and guess in tonights poll:

What will the total range of front month crude oil prices be in 2008, as a % of Dec 31, 2007 closing price ? (of Feb 08 future - we have to use feb because that is front month at year end) Today we closed at $96.

The poll options are:

1)Low volatility: total range less than 10% (implying a range of oil prices under $10)
2)Medium low volatility: total range between 10% and 20% (implying a total range of between $10 and $20)
3)Medium volatility: total range between 20% and 40% (implying a total range between $20 and $40)
4)Medium high volatility: total range between 40% and 60% (implying $ range between $40 and $60)
5)High volatility: total range between 60% and 100% (implying total range between 60-100$)
6)Extremely high volatility (Range over 100% - meaning the high minus low of 2008 prices will be over $100)

Clearly the high and extremely high options will only occur in a bullish year for oil, or at least one that starts out bullish.

Place your guesses below. My personal view is that oil continues to rally but the credit crunch/recession causes demand 'management' to overtake depletion as the year progresses. I see a high of $134 and a low of $79, for a range of $55, which is 60.4% of $96. But the volatility of my volatility guess is high!!. We may see the 'demand' side of the peak oil equation take its turn in the spotlight.

Here is the POLL distribution so far. The poll will close on Jan 1. We'll look back in a year who gets the pat on the back (or the date with PG...;)

I say #4 - medium high.

My guess is #5, but i do believe 2008 will see an expanding of the disconnect between the price of a barrel on the markets & what importing countries are actually paying in individually negotiated contracts with exporting countries.

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Well, that explains the paucity of votes so far.

Voting on chaos is an interesting concept. But I can't make TOO much fun of it since I spent my piggy bank money on variously-dated $100 crude call options. If crude doesn't significantly beat 100 in 2008, my wife's volatility will definitely increase, and she's Italian to start with.

Of course, if I sell the calls for a profit when crude hits $110, and then it goes to $150, she'll want a divorce, so there are real-world implications for me other than, y'know, being poor.

The safe bet is that the convergence of humans vs. the natural world will cause all sorts of collapse. How that projects itself onto the one dimension of oil price isn't knowable, but my brain reward systems are now convinced that I've done something.

Judging from my past investments, oil won't crack $100 until after Dec 2010 when the last of my options expires.

And gee, being in Hawaii timezone I've never been this near the top of a comments list. Let me take this opportunity to wish for peace on earth, and remind the al Sabah family (you know who you are) that you still owe me $95 billion for that thing I did for you in '91.

Now THAT is funny! (even more so because I tend to think youre at least partially serious...)

Peace to you greenish, my friend. Perhaps the internet viral community will somehow align to steer us from the current path.

I see a high of $124 and a low of $66, for a range of $55, which is 60.4% of $96.

60.4% is my guess

Hi Nate,

So, you're guessing slightly less volatile than '07? My guess would be it increases in '07.

Unless, of course, we collectively (or individually, with some sum total of results) manage to steer things in a different direction.

Whilst economic depressions have historically caused reduced consumption, oil usage, and hence oil prices. In this case oil and gas appear to be driving economic and financial developments. (more akin to the 1970's oil shocks)
The source of the credit/equity bubbles, can be reasonably attributed to oil dollars being invested back in OECD countires, substituting export goods exchange by debt, and asset buy out, propping up the formerly productive economies of US/UK etc, with equity released consumer spending.
The turning point over the last year has been reached as a result of the worlds energy budget flattening if not falling. Economic production, consumption, profit, can nolonger rise at 2 or 3 % worldwide to maintain the interest payments on the mountains of (significantly petro dollar) debt accumulated in the OECD.
Oil and energy price inflation will continue to rise as the gap, between the required growth to fulfill the percentage returns on assets and the available energy, widens at an increasing rate.
With a 5% gap between growth forecast and actual oil production by the end of 2008, I would see an oil price reaching 150dollars by year end, with a minimum of 85$ a barrel near the start of the year.

But just in case that poll link is only for the results, I'll add my guess: #6, extremely high volatility.

I don't think those voices in GW Bush's head are going away any time soon, and there's still time for some impressive kaboomery before they take his buttons away.

#3 I think it will be another $40 range year next year, only the range will be $80 to $120.

#6.....very high. The inmates have taken over the asylum.....I am packing for a long vacation.

#4 for me, as well. Hard to say which will hit faster-the oil shortage or the money shortage-either way, most of the volitility will occur in a fairly short time frame (like 3 months, max)...

Of course, I could be wrong... :-P

Franc (penguinzee)

edited for speling

Will have to guess number 5. I believe $140 is going to be pretty achievable, assuming that the entire system manages to hold together for the year.

I think we have a pretty good floor in around $75 for a spread of $65 for the year, just within High Volatility. I have been a bit too conservative lately, this well could continue that trend, sigh.

Happy New Year all!

you should do standup comedy. no kidding, i laughed the entire time i was reading your post.

good luck with the wife and those options ;-)


Low of $8o, high of $140, I guess that puts me at the high end of scenario number 4. the volitility will come form specualators and the big hedge funds more than actual supply/demand function. The move up today was trade based on the Turkish bombing of the Kurds. It had little or nothing to do with the supply of oil. I think that will be the situation for the forseeable future. The guys writing here that are in the know are saying that we can look for a plateau for the nest 5 to 8 years in the supply of C plus C. That tells me that most of the price variation will come from rumours more that fact.

Hello Rich,

re: "a plateau for the nest 5 to 8 years in the supply of C plus C."

Another 5 to 8 years of plateau? Are you sure?

Plateau for 5 to 8 years; am I sure. Heavens no. I was just pointing out some of the articles in TOD postulating a plateau extending out to 2012 - 2015. There will certainly be efforts to increase production by the oil companies by various technical means which will be profitable at the present prices and future higher prices.

There has been some dicussion under several articles, none of which I could cite from memory, concerning the possible delay in enchanced recover to take advantage of future higher prices. I think that most companies and management will prefer present value over future value.

Rich: Guys in the know? Check out what WT and Khebab predict for 2015 oil exports.

Hey, there is many different opinions out there. We will just have to see how this unfolds over the next several years, all the time having events nudge the reality one way or the other. Am I wrong? With a 95 percent certainity I can say that I am.

Are you assuming the demand side will stay flat too?

Although the Turkish bombing presents a small risk of an escalation and risk to future oil supply from the region, when supply growth does not keep up with demand growth, the impact of small risks is amplified. In this situation, high prices and volatility come hand in hand.

At these prices, there will be a fairly significant demand destruction taking place. While this will not completely make up for the increase demand from other centers, it will give some relief. I do agree that in a tight supply situation that small events can have major effects, and thats why I went to the high side of the moderate volitility scenerio.

I would say medium volatility. It all depends on the US economy in 2008. It looks like we are heading toward at least a mild recession in which case oil prices may collapse toward $50 and lower.

A collapse down to $50??? Whatever your smokin', I want some....Do you think China and India (and others) are going to to sit on their little tushies while the idiot Americans have their little recession? The world turns, with or without us. Look at what the recent air strike by Turkey bopped the price up to.

this is the real question isn't it
Does the world economy work with out the USA? I don't think Asian consumption can keep up with Asian production right now, but when it does... kiss your life style good bye

Hi earl,

Well...one question to ask is: what percentage of the US consumption of Asian production is financed by...debt? (i.e., ever-increasing debt at that).

Then, given your guess that Asian consumption can't keep up...the number of logical possibilities includes not only US lifestyle "good bye", but several other economies as well.

It is nearly impossible for a dyslexic to communicate like this, (typing/writing) so thanks for your patience.
Debt is my big concern. When the US$ is no longer the world reserve currency I'm afraid it's lights out for N. America. Have you seen the Death Of The Dollar The guy who puts the piece together is not funny, but the people he interviews are legit. But then again what do I know : - )

Debt is my big concern. When the US$ is no longer the world reserve currency I'm afraid it's lights out for N. America. Have you seen the Death Of The Dollar The guy who puts the piece together is not funny, but the people he interviews are legit. But then again what do I know : - )

hi earl,

I guess the trillion dollar question would be the when this would happen. though, with US supply of coal and the chinese need for coal and their oversupply of dollars that day of reconing may be delayed a bit.
just a thought.

Hey a fellow dyslexic !

Welcome aboard. Do your best they are fairly forgiving.

I think Asian consumption and in particular China esp as the US slows is probably a critical factor for commodity prices across the board. I'd say they are so over heated not that sheer inertia will keep their economies afloat. Also the Chinese imports tend to be cheap stuff so its not clear a recession will even lead to a significant slow down in consumption of chinese goods as people downscale their spending. So for every poor person that scales back a formerly upper middle class person will shop more at Wall Mart.

So we might not see chinese imports drop as rapidly as we think. And I think the Chinese government could if needed spur more internal consumption if needed at least for a while.

I'm not saying that Chinese growth rates won't start to slow but they are at what 10% now even if they slow to 8% this is not seem to be enough to really change the current supply demand equation.

Memmel: Just did some googling and according to my quick number crunching 2007 Chinese exports EXCLUDING THE USA are 80% higher than 2004 Chinese exports INCLUDING THE USA. My conclusion is while the USA is the most important customer, that is obviously not the whole story on China.

HI Brian,

Thanks for this statistic - it's amazing. I'd like to see more on this. Perhaps you could write this up as an article for us to discuss.

Like...more numbers crunching...kind of a list. It would be interesting to see the different years, w. and w/out the US...to be able to see the trends and amounts.

In fact, the more I think about it...this seems like a crucial piece of the puzzle for looking at economic implications.

My guess is #6. It seems new Mega Projects will add to supply. High costs of fuel will hobble military operations that are currently keeping a lid on instability.

Specific events are becoming more unclear while the trend is becoming unstoppable.

IMO, unfortunately Peak Oil is real and we're in it now.

#6 for volatility

Maybe as low as $90 in Jan / 08

Up near $155 by early June / 08

likely be $210 by March / 09

Bakhtiari wrote that extreme volatility was indicator that we were screwed - the market gybing between oversupply and undersupply +/- a barrel or two. That was his "phase II" if I remember?

I can't vote in the poll. I don't know what a dollar is. My standard olive oil has gone from $24 to $44 since the last time I stopped into Miccucci's Market. That's a Greek version of EU. Other olive oils have not gone up so much. I can still purchase Palestinian olive oil at the same price, $12/.75liter, at which I've been able to purchase it for past year. [It's not as OLIVY.]

The range of volatility (there is probably a better term) is more interesting than the actual numbers.

cfm in Gray, ME

Bakhtiari wrote that extreme volatility was indicator that we were screwed - the market gybing between oversupply and undersupply +/- a barrel or two. That was his "phase II" if I remember?

No, we are in transition phase T1 between growth and decline, lasting 3-5 years starting with 2006, a phase which shows characteristics of both growing and declining oil production. That is the cause of high volatility. Read here:

Dr. Bakhtiari's presentation to the [Australian] Senate Hearing on oil supplies in Sydney in July 2006

#5 High volatility

Two reasons: First, 2007 was a year of high volatility, and nothing has changed. Second, I'm an optimist. The only thing that could keep oil trading in a narrow range is a very serious recession, and I don't want that, and only seriously interesting times could trigger "Extremely high volatility" - and I really don't want that either. - J.

I'll go for #6. Above ground factors are likely to coincide with geological factors to make for interesting times. Maybe, maybe not, but that's my guess.

#3 with the price trending down due to demand destruction.

Israel attacking Iran is the wild card. Then #6 would be mild.

I vote #6 the combination of a official recession and probably increased instability in Iraq/Turkey Syria/Lebanon plus probably continued draw downs in OECD inventories will have people unable to "herd". This will go until we have a trigger event either a hurricane or reasonable widespread gasoline shortages or something in the ME which will force a direction.
Without a event the combination of people betting on demand drops because of a slowing economy and real inventory data will keep prices very volatile. I still think we should have been heading down towards 80 and am a bit perplexed that prices are staying high now. My guess was we would start under 90 around March and surge to over 100 by the end of the year.

The one time I agree with Roberts Rapier on the oil markets they seem to misbehave. Maybe people are really waking up to the fact that OPEC is doing everything but producing more oil.

So the big event for 2008 may well be a dawning recognition by the world that we are peak. I figured it would not happen until later but given the internet we might actually see people become informed despite the MSM.

I noticed with the housing bubble once people caught on and started reading the blogs the MSM quickly changed its tune.
We may see the same thing next year if Peak Oil becomes reasonably obvious that it moves quickly into the MSM.

If this does happen then Peak Oil awareness will probably be the defining factor of next year and it will probably remove a lot of the volatility from the prices leading to a clear surge upwards. Otherwise volatile with the chance of a normal trigger event sending them skyward.

hmmmm.............. possibly #5 if mexico's feilds continue death spiral, $150- $160 per barrel by dec '08. thou probably $4-$5 per gallon of gas even if oil holds steady by summer. if mexico holds up production and we go into ressesion probably looking at $70 oil

How much does gasoline demand go down just because the US of A is in a recession. People don't have jobs to drive to? I'm going to take the medium volatility 40% to 60%. People will stop buying SUVs and hybrids gain market share. Does that mean I buy a straddle on the futures market? I'm meeting with my financial adviser in two weeks and I don't know which oil option to buy.

I'm going for no 6.

I think the signs are good that next year will be more
volatile than this year.

Also I count 9 houses for sale in in a 5 minutes drive through esperance, Western australia. And this is in a booming economy. Petrol AUS$1.47 a liter

While Basically we have not hit $100 US this year there are Still a few days left so we might make it.

However and sadly Near misses only count in Australian rules and hand granades, not in betting, so the only reasonable response to failure is to double the bet.

I'm no financial guru.....but my guess would be if you went with a$110 call option and a $90 put option for dec '08 then you would be effectively be hedged tward volitility. i.e. if producion in mexico stays afloat, plus a ramp up in canadian oil sands goes well, plus Iraq oil production continues to improve, AND the us,europe and china go into ressesion (being that we are so linked with globalization) then oil demand fall leading to $70 oil (all of which are possible). thus a $90 put option becomes a moneymaker. equally possible is that Mex production falls further, plus with ill advised rate cuts and co-operation between central bankers avoids world ressesion, then we will definately see over $110 oil and the call option becomes the money maker. Or if we have oil shocks jerking price above/below $90-$110 range then both could be money makers. the downside would be if oil 'bump' between $90-$110 for all of 2008, in which case you'd be screwed both ways.

I think there is a very good chance of real refined product shortages due to infrastructure issues that will cause some panic and contribute to a spike in NYME prices. This will probably be aided by crude supply issues and a continuing decline in US reserves. However the economic chickens are going to roost sometime this year and that will then lead to a crash back to about $70.00. I don't think it will go below that this year as there is a great deal of momentum in the world economy and it will coast down as orders in the stream begin to dry up. The world wide prices will probably hold stronger than WTI. In any event there may be a surplus on the world market with heavy sour becoming hard to sell. The Alberta economy here in Canada will be suffering by years end with the tar sands expansion snapping shut like a clam. The oil majors and the clean up companies will probably keep the expensive off shore operations pumping as the capital has already been spent but exploration will dry up and cheap restartable dry land fields will be mothballed as well as refinery plans of all sorts both here and around the world. Of course, any storm damaged infrastructure in the GOM or elsewhere will be "scheduled for repair as markets dictate".
Up to $130.00 and then down to around $70.00.

#5 as I can't see it being less volatile than 2007. It seems like the world is still in a state of denial about PO. That denial is part of what IMO makes the game more volatile.

On Xmas Eve, I was at a family get together and my brother's inlaws were there. His father-inlaw had deteriorated in health drastically since we last met in the Spring. His health has been on the edge of no return for several years and it now looks like no return to some semblance of normal health is a given. A similar situation to my Father's slow, painful decline several years earlier.

The Medical establishment, just like the Oil establishment has become incredibly skilled at preventing the inevitable death of their respective patients. But the lead up to their deaths will be made more dramatic and volatile by the system's refusal to acknowledge that life just like oil availability will come to an end ultimately.

Best of the season to all,


I am choosing #1 because after the political and financial systems become usurped by the new world dictator (to be convenientally inserted right before the US prez elections), prices of energy will be fixed by the global czar and there will be $0 volatility.

I pick #3 with volatility at 40% with high reaching $120 per barrel early in year.

As recession takes hold of US (already started in some sectors and some areas of the country) oil will end at $80 as jobless rate rises. Demand will be falling faster than supply as a 10% drop in US demand is two times greater than a 10% rise in oil consumption by India and China. World demand would fall faster but oil producing countires will not be in recession so they continue to use more causing less to be exported.

A falling dollar will keep the bottom price from going under $80 for US consumers. EU demand will not fall much but they will enjoy cheaper oil prices relative to USA due to dollar decline. EU will have the equivilent of $60 per barrel oil by year end.

I'm going with a high of $109 and a low of $83, for a range of $26, which is 27.1% of $96.

That puts me in #3 which is my guess.

Mild but prolonged US and EU recession in 2008 combined with continued but slower growth in Asia will keep prices from going too high or too low. Relative stability world wide during 2008 election campaign and increasing relative political stability in the Middle East will keep prices relatively stable.

Wild cards: Turkish/Kurdish situation may get out of hand. Relative "stability" in Iraq could deteriorate quickly. Potential domestic turmoil in Saudi Arabia could destabilize the country. Potential, although not probable, serious 1930's style depression in US could cause prices to drop significantly. US sponsored destabilizing action in Venezuela (unlikely) or significant rise in tensions between Russia and US could affect volatility.

If wild card events occur, all bets are off re volatility. I will, however, stick with my #3 (27.1%) prediction.

I'm gonna go with #3 because I just read the Wikipedia Major Projects listing and lots of oil is supposed to come on line next year and the US economy is supposed to fall into the toilet. I think that will keep prices relatively low and stable given that there will still be a China in the market making shoes and lead-based toys for us.

No. 4.
Range of 48-96, beginning around 96, volatility of 50% if I did this right.
Overall avg for year of 75, slightly higher than 2007. Just slightly higher for 2009 because recession continues.

I'll go for a level 3 volatility. The bigger question is whether the price will be higher or lower. I'll predict $80/bbl by the end of the year.

Energy Guru

I'm not going to make a guess about volatility, but I'd love to know what is going on with the reported volume numbers on the NYMEX, because if these numbers are right, this right here is crazytalk:

Oh, and hi, I've been reading on and off for a while, but I didn't make an account until tonight mostly because I've been trying to figure out WTF is going on with this volume all day and am out of ideas. For those who don't know, traditional daily trading volume on this market is in the 300-400,000 barrel range with spikes up to 1Mish, but most emphatically not 15-26 million barrels as we've seen in December. But nobody seems to be talking about it, possibly because nobody pays attention to this number, and most data sites I know of don't even expose it. I don't even have a second source to back these numbers up. marketwatch and bigcharts.com are traditionally pretty reliable, tho'.

So, yeah. Weird. Apparently. Certainly unprecedented in the data range I have, which goes back to mid-2005.

Anybody else have more data? Is this real?

dead link
could you translate this into English, I'd really like to know what you're talking about

ARGH, I thought I found all the places the kittens screwed up! (Kitten George walked on my keyboard. V. annoying. I need one of those cat-typing detectors.)

Here's the link, fixed:


Nice plaintext, nothing to screw it up.

The spot market graphed here is the market where US oil futures contracts are traded. The mini price-only graphs on the right side of the main page near the bottom are showing prices in this market. (These are the ones labeled CLG08.) When you hear quotes on oil prices in the news, it's this market.

The number of barrels traded per day is normally in the 300,000 to 400,000 range. Occasionally it'll skyrocket up to 1,000,000 in a day. (Why the price for oil in general is determined by this small fraction of total consumption and in this way is... a long story. Skip it for now.) In the last month, that circled portion of the graph is showing 10,000,000-26,000,000 barrels traded per day, averaging somewhere around 15,000,000. As far as I know, this is unprecedented; it's 15 to 30 times traditional market volumes virtually overnight. It's certainly unlike anything I've ever seen or can see in the limited range of historical data I have. It is also, if accurate, a major shift in the way the market is behaving.

I became aware of peak oil issues through watching the way the oil market started behaving in 2003, and researching from there. If this data is valid, this could be another indicator of another market shift which is similarly of potentially significant interest. I'm hoping others here have more data than I do and can elucidate, because so far... nobody seems to be talking about this.

(The original graph generator is here, on marketwatch.com, if you don't want to trust my screencapture. If that link expires, go to marketwatch.com, click on "Oil" in the daily chart on the far right, then on 2Y under the new graph when that appears. And hopefully all the links work this time. ^_^;; )

VERY interesting
Thank you

What your are charting is the February 2008 contract alone, not the entire crude oil futures market on NYMEX.

As with any month's contract, when it first starts trading, many months and sometimes years before expiration, there is very little interest in it and thus next to zero volume. But as it comes closer and closer to expiration and eventually turns into "spot" month, volume soars. February 2008 IS now spot month, by the way.

For your purposes you need to look at the overall volume and open interest, for all contracts. These have been expanding as well, a very common phenomenon in a strongly bullish market. They have roughly doubled since Dec. last year.

Okay. That contradicts what I've been told about total volumes before (across all contracts), which is why the low trading volume has struck me as reasonably normal. But your explanation makes much more sense.

I also can't get the marketwatch tool interface to give me anything other than this volume graph no matter what letters I throw in on the contract name. (Don't laugh; that's how I got it to give me more than 2y data, which it doesn't want to do through the UI! ^_^) Very annoying! None of the other charting services (free ones *^_^*;;) that I usually look at (or found via google) give any interface to these contract volumes at all - do you know of any that do?

Thank you very much! Those are much better. ^_^

2008: US Presidential Election Year, Fed and US Treasury franticly bail water to maintain "Strong Dollar Policy," "World" continues to "fund" US Deficits sensing change through election results. These three factors maintain BAU and the "bumpy plateau" in all liquids pressures demand and price ranges from 89-150--rising ever higher till November 2008. On the production side, I see escalating trouble in Nigeria and accelerating decline rates for Mexico, North Sea, and net exports as a whole.

So, I'm on the border between medium high and high: 4.85.

US election year.

The End of Globalization?

By Gabor Steingart in Washington

Great political change often begins with the smallest of doubts. Such a doubt is beginning to make itself heard in the US presidential campaign. Free trade, Hillary Clinton is saying, may not be so great after all. Could it signal the beginning of the end for globalization?


We all know peak oil means the beginning of the end of globalisation.

'It's the economy stupid' so #3 for me. Increasing volatility often signals a turning point so the price is likely to change direction - down. My guess is a trading range of $70 to $90 next year. It will stay in the upper $90's in Jan and Feb but come down after that, IMO.

If the oil price really is a call option on global economic growth (my view) then the slowing global economy will bring the price down. Also there is quite a lot of new supply from megaprojects next year.

It's really hard to get through to some Peak Oilers that there will only be shortages after peak if there is a supply shock. The oil price is a price mechanism that tells you about supply and demand, and nothing about oil. It's done a fantastic job over the last few years in balancing supply and demand. Supply has been tight but no real shortages except in those countries that subsidize the end user but not refiners (e.g. China).

Demand from China and India? Forget it. They are just deep into a huge economic bubble. They really can't bury their (US) customers and get rich.

Hello Alan,

This is a critical question.

re: "Demand from China and India? Forget it. They are just deep into a huge economic bubble. They really can't bury their (US) customers and get rich."

Is it true? Or wishful thinking on the part of the US?

Did you see BrianT's comment above - ?

If you can do it, I'd also suggest the same thing to you - I think everyone would be interested in an article that looks at this question w. some references and arguments.

#3 $20-40

The recessionary effets may start to be felt towards the end of next year but will probably be glossed over during the US presidential elecion. For the same reason the main international lunatics may just decide to lay low next year and ramp up the rhetoric in 2009 to test a new president.

#5: I think it will reach $149 and then crash back down to $110.

I'm going with #4. I can see where a hard pull-back of the US economy (and a declining dollar which will tend to increase the cost on this side of the pond) could play havoc on the downside. And we are running so very close on the ohter side that all we need is just one more event to push prices the other way.

Historically, the oil price in the period of week 27-30 gives the best indicator of average oil price for the year (usually within about 5%). But 2007 looked a whole lot like 2004 in the way oil prices tracked about (just higher).

Nate I voted no. 3: 20 to 40, based on earlier "analysis" of charts. This is based on bau with a range of known unknowns continuing to operate. This will almost certainly be wrong as unknown unknowns may play a greater roll in 08. My feeling is that 07 was a fairly benign year but the stage feels set for 08 to be a real roller coaster.

Note only 3 votes thus far - folks are clearly concerned about winning that date with PG:-)

As for only 3 votes... some of us are not allowed to vote! ("permission....")

Question: if 2007 was a benign year and 2008 will be a roller coaster year, why did you vote for the "3" option?

One thing I noticed with many of the replies above, is that people have skipped the data collection on new projects coming online in 2008. Assuming that the data collected (by S.S. et.al.) is somewhat accurate, are we not expecting enough new new production to show up in 2008 to more than offset declines?

My choice is #4. Obviously there is resistance at $100 for now. A pullback should stop at the previous breakout of $80. I expect after this base is completed and the breakout above $100 occurs next year that oil will run to about $133.

Prices in 2007 were held down by the ethanol glut, but now ethanol is rising fast as is gasoline and diesel. The housing bust surely mitigated prices, but in 2008 the Fed will push money into the system one way or another to try to get Republicans elected in fall 2008. Couple this with a booming Midwest demand for oil in the spring as flush farmers expand grain production spurred on by record prices. I expect to see $4 gas in Iowa and even higher in California.

Off setting supply increases and recession in the US, will be increased demand in Russia, China, India and most OPEC countries. World population will continue to grow and the number of vehicles on the world's roads will continue to increase especially in the named countries.

SS et al - I'm currently assuming that this is a "front year" phenomenon whereby delayed projects get rolled into the front year. Hence I'm expecting 5 mmbpd new capacity in 08 and this time next year we'll be looking at 8 mmbpd forecast for 09.

I could be completely wrong in this appraisal.

I'm not authorized, either. However, my guess is #6, as I don't think Geo. Bush is any longer a coherent thinker, and will ultimately bomb Iran. Oil will go to $200 per B. And by that time the price will no longer be calculated in dollars, so that will add to the difficulty of making the volatility calculation...

(An aside: I thought that, with 2008 being an election year, our Republican rah-rah warriors would sober up; however, the campaign has had the opposite effect. It is that effect that would seem to make an attack on Iran a likelihood, raise the price of gasoline through the roof, and spell the end of The Big White Pickup, a seeming icon of Republican manhood here in the Pacific Northwest. Ahh, irony of ironies.)

I'll go for #6 too, not because I think it particularly likely that US/Israel will bomb Iran (unless the Israelis really snap and go insane) but because I think the declines at Cantarell, Ghawar and elsewhere may be much worse than expected and the US economy could somehow muddle along a bit longer. It seems to me that quite a lot is required before a significant amount of demand destruction is achieved.

I'm guessing a trading range between $75 and $150, which I guess makes me #5.

how much influence does the "boy king" have on this situation? Since he vetos everything that hits his desk, he is essentially now a dictator. Seems to me that he and his minions want to try to keep things as smooth as possible so there is a better chance to get a another dictator (republican) in office next year.
I don't think we can ignore the political possibilities when forecasting.

I suspect the demand will drop and thus price will stay well below 100. Put me at 2 or 3.

I would say #5.

I see a floor about $85, steadily increasing price through 08 to about $175, then the resulting slowdown bringing price back to a new floor of about $150. If anything develops in the Israel/Iran area, adjust my vote to a mythical #7, way over anything we can imagine. So, let's hope that GWBush can do one thing right in his presidency and that one thing will be to cool the tensions in the Middle East.

As to the $150 "new floor", the rest of the world will be impacted by our problems, but the emerging economies in China and India are going to keep using increased amounts of FF once they get going, and could stop the overall world situation from becoming truly disastrous. Would that be a bright spot?

I still wonder if we adjusted our consumption to necessities, and we only relied on our domestic production, some 35=/-% of our present consumption, what would that do to our economy? I.e., could we transition to something else from there as our own declines occured? Obviously, not business as usual, but could we keep people fed, the lights on, etc.?

"Happy" New Year, All.

"Happy" as in "happy farm"?

Actually, "Happy" as in sarcasm, like this next year will likely be a wild one and a lot of people will be hurt or ruined financially by the fluctuations in oil (and natural gas) prices.

My background in oil and gas accounting, from small refiners to producers who can give millions to universities to little producers like myself, and in finance, from huge banks to virtually mom-and-pop S & L's leaves me with a perspective for the petroleum based economy which has left me thinking that world is not ready for the shortages we are facing. Or, it is possible that only the twenty or so economies around the world who cannot get sufficient petroleum to meet their needs are an abberation and we are not, but I think that we will see the same problems as the dollar plummets. Of course, Bernanke could buy a lot of extra helicopterss and new and faster printing presses, which will work for us only if the exporters keep their currencies pegged to the dollaar.

Well I just voted #4 77-119 that makes 5 votes.

All the energy protests in 3rd world countries will alert the world that BAU is in jeopardy

there was snafu when poll was originally posted - its working now -TOD is a microcosm of a)dependence on oil and b)decreasing returns to complexity.....;)

The Age of Cheap Oil is over.

I see prices rising to $150pbl within 12 months. The credit crunch fallout may dent the upward trend a little though, perhaps a dip to $88pbl around springtime.

There are two main drivers to price now; big-field decline and resource nationalism.

The hard realities of Peak Oil will replace the Global Warming Diversionary Strategy in the public conciousness, then it gets interesting.

What you said, I'm goin' with 5 too.

If fuel shortages become commonplace at the bowser all sorts of problems may emerge.
Hoarding at government, business and personal levels and other attempts at amelioration will probably drive the trend up initially......while there is enough money and employment.

I vote #4, with a range of about $90-$140. Since 2002, the annual high for oil has climbed about 40% per year. In 2006 it was less, but 2007 made up for that to keep the average at about 40%.

I'm going to throw my hat in the ring with Henry Groppe's prediction of oil trading between $65 and $85 for most of 2008 (putting my guess at #3). Reasoning being that the world has been essentially at plateau production for several years with the price of oil in the $60-70 range for much of that time. And during that time the transportation use of oil has continued to increase. To keep things balanced, some non-transportation use of oil has had to decrease. Much of this demand destruction has come from switching high priced oil fired energy generation to other lower priced non-oil sources (predominantly coal). Since there is an estimated 25% (some 14+ mbpd oil) of oil-fired energy use still out there, we could be at peak oil, still grow the transportation use of oil, all while the price is relatively stable and lower than what it is today. Further demand destruction would come mostly from the oil-fired energy uses.

Other things that I think will keep us at or near a plateau in the face of most regions in decline are the megaprojects coming on line (bumped from 07 to 08) plus some judicious tweaking of the supply from OPEC (mostly Saudi Arabia).

The big things that could increase the volatility (on the upside) are geopolitical and acts of nature. These should most likely be relatively short in duration as we saw with Katrina.

I'm going to take a bit of a contrarian view since the future often unfolds in an unexpected direction.

If the US goes into a recession there wont be a drop in oil prices. I see prices go through the $100 within the first 2-4 months of 2008 and stay there.

The issue that will keep the price high will be China and India's demand, as they will still grow inspite of a US recession (Canada so far seems immune too). Added to this is less exports by countries who will hord their own oil, and we will see prices rise still. Though I see it being a roller coaster ride up as jockeying for position occurs.

I'm picking #5.

My WAG is that there will be 3 or maybe 4 cycles during the year with higher highs and higher lows.

A US crash is possible, but probably won't occur until after an even more corrupt election result than the last two.

China won't pull the plug on the $US until after the Olympic Games, even though it will cost them bigtime as the $US continues to tank due to its own inherent weakness.

The US has proven that fake reporting can support Wiley Coyote in mid-air above the canyon for several years, so there is no reason that an overdue US collapse will result in an immediate global collapse. The current momentum of the BRIC and ME economies can continue for some time, with more than enough demand increase to compensate for the DD in US and EU nations. Of course if Shrub still has the insane desire to prove that he can start a "bigger and better" war than Daddy Bush did, then all bets are off.

Happy Hogmanay

No one who wants to play this parlor game seriously should enter a vote until the last possible price print of 2007 takes place.