They say the best piece of advice anyone can give you about predicting the future price of a barrel of oil is not to listen to any advice. It's probably the single truest statement you could make - but there are, as usual, plenty of experts out there prepared to risk looking foolish in order to give the industry their opinions.

Many views are now being given on what the price of crude will be over the course of 2000. It is virtually impossible, however, to make any kind of prediction with any certainty as to what the price will be in 20 years.
But even this does not deter some from taking a guess. The respected Energy Information Administration, the statistical arm of the US Department of Energy, came out recently in its annual energy report with a confident and very specific prediction that the average price of crude oil in 2020 "will be $22.04/bbl in 1998 dollars, a drop from last year's report of $22.73/bbl in 1997 dollars, which is a change of nearly $1/bbl when last year's figure is computed in 1998 dollars." This works out at about $36/bbl in 2020 money of the day, based simply on the fact that oil prices are rising pretty much at the rate of inflation.

Lottery
But predicting the price of oil much nearer to the present day can be just as much of a lottery. The fact that the price of a barrel of crude has more than doubled since the beginning of 1999 to more than $24/bbl makes something of a mockery of forecasters who at the beginning of last year were saying that the price was likely to fall to a new base rate of around $5/bbl-$6/bbl and perhaps stay there.
However, it is always easy to pontificate with hindsight, and so we should not dismiss forecasts. Most within the industry have to admit that the price of oil could indeed have fallen that low, had OPEC's rearguard action not proved so stunningly effective in lifting the price, proving that there is still plenty of life left in the oil cartel yet. Unfortunately, it seems that it only ever truly shows its pedigree when crisis conditions arise.
So what are the forecasts for the coming year? Most observers believe that there may well be a series of price spikes over the course of 2000, perhaps even seeing a barrel of oil rise in cost to $35 in extreme circumstances, caused by one of the most dramatic drawdowns on oil stocks seen since the 70s.
If OPEC continues its period of compliance until at least June, it is predicted that the severe tightening in the oil market would not allow a stock recovery to take place and would cause stock cover to fall to possibly 46 days in the OECD for the industry. One panel of experts-while not exactly putting their reputations on the line-gave their predictions at the 20th Annual Oil & Money conference organized by the Energy Intelligence Group and the International Herald Tribune.
The figures of $35/bbl and $30/bbl kept cropping up - but only at the top of spikes they predict could happen during the course of this year. "Even if OPEC increases its output by 2 million b/d immediately, the decline in stock cover would continue into the year before being arrested," said Leo Drollas, chief economist for the Centre for Global Energy Studies.

$30 peak predicted
However, fellow panelist Herman Franssen, director of Petroleum Economics Ltd. of the United States, predicted a possible $30/bbl peak of oil, and added that he foresaw a stable market this year after perhaps an initial price spike.
Wood Mackenzie recently reviewed its position also, increasing its 2000 average $2 higher to $17/bbl. Its assumption for 1999's price was $16/bbl as Hart's E&P went to press, against a $13.50/bbl prediction earlier in the year. In 1998 the average crude price was $13/bbl to $14/bbl.
Another saying that is often sound advice is that in order to look into the future, you should look no further than the past. Bearing this in mind, the fact is that over the past decade or so the oil price, despite its various oscillations, has basically moved sideways and averaged about $18/bbl.
A key question some are now asking is whether the oil price has moved to a new, and higher, playing field existing in the twenties. It is sitting about 30% above the long-term average just mentioned, and some feel OPEC's recent resurgence may have helped shift the base level up.
But according to the leading economist at one oil major-Tom Kerrigan of Texaco Inc.-this would not be a wise assumption. "I think not. A year ago WTI was $12/bbl, then just recently it was $25/bbl, but it averages out at about $18/bbl over the past decade...the same thing happened in 1996 when prices were around $20 to $22. People started saying the price structure had gone up - then it collapsed under economic recession in 1997." He added that there was a temptation to say prices had reached a new level, but that there was too much production level uncertainty in the near future - the resurgence of Iraq, for example, and the turnaround in FSU output - to be certain.
He did, however, finish on a high note for the upstream industry. Kerrigan - a self-confessed "flat earth" economist - pointed out that the E&P sector will remain "a magnet for investment" if the oil price remains at around the $20/bbl level.
"I think that the reserves are there. If you look at the portfolio of assets that companies currently have, there are very few projects that do not pay out handsomely if it holds at $20. So if it holds at that level the mindset of the industry will change from that which it's adopted over the last year or two and, as the industry's collective mindset changes, capital will be forthcoming."
The $20/bbl price would also see many companies adopt more aggressive expansion plans, he added.
It is worth, of course, always counterbalancing optimistic points of view with a hefty dose of pessimism. Much of the presumption of the price of crude, and resulting investment in new upstream exploration and field developments, is based on world demand for crude rising as currently expected from its current level of 74.9 million b/d to 112.4 million b/d by 2020. Crucially, this is said to be led by a jump in transportation fuel use.

Warning for the future
One consultant gave a warning to the oil industry that should be heeded.
One key factor being mostly ignored by many oil companies today is the simple fact that likely advances in car and transport technology could render crude relatively obsolete in a fairly short space of time. The development of better fuel consumption technology for cars and the increase in the use of fuel cells over the next decade could dramatically hit crude demand and therefore push down prices towards just $6/bbl, said Roger Rainbow, a strategic planning adviser for Control Risks Group.
Bearing in mind the future energy mix outlined in a previous article earlier in this feature, transportation fuel use is the main future market for oil. But with the public's heightened awareness of environmental matters, and car makers' knowledge that this could translate into major sales success for those who exploit it best, this trend should not be ignored. As Rainbow himself commented: "The future of oil prices may be decided in the design studios of Detroit and Stuttgart rather than in Riyadh or Vienna."