The Value of Oil Price Projections

Nakicenovic, N. ORCID: https://orcid.org/0000-0001-7176-4604 & Schrattenholzer, L. (1985). The Value of Oil Price Projections. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-85-068

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Abstract

The central theme of this paper is the development of the international price of crude oil. A short overview of oil price history is followed by a discussion of the factors that were responsible for previous, sometimes erratic, changes. We conclude that these factors are likely to maintain their influence in the future, thus giving the forecasts of oil prices a high uncertainty. This uncertainty is reflected in several reports containing oil price projections. We argue, therefore, that a question solely about future oil prices must remain unanswered. This does not render the efforts to examine the future futile; it simply means that the question should be rephrased. We offer one possible problem formulation that explicitly accounts for the high uncertainty. This formulation requires that specific policy problems and options for solving them be specified before oil prices are projected - a condition that does not always hold or, at least, that does not seem to be regarded as important enough to be described in many reports on oil price studies.

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