In
this blog, we made a mid-term prediction on the evolution of crude oil price in
September
2012:
“The level of oil price in 2016 is expected between
$30 and $60 per barrel. “
This
is a revision to our oil price prediction as based on the difference between
the overall PPI and the index of crude oil. Figure 1 compares our previous prediction
in 2012 (upper panel) with actual oil price trajectory between 2012 and 2016
(lower panel). Both panels present price range, which expresses the slow fall
through 2016, with the uncertainty bounds for the long-term trend in oil price.
In April 2016, the observed oil price was close to the average value of $45 per
barrel in 2016. Following our analysis of the difference between the
core and headline CPI, we expect the price of oil to fall to $25 at a five
to ten year horizon.
The price range will likely hovert between $20 and
$30 since 2020.
Figure 1. The evolution of oil price since 2001 as estimated
from the differnce of the overall PPI and the PPI of crude petroleum.
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