UnNews:Forecasters miss oil-price rout

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11 December 2015

The productive sector took no heed of the cataclysmic forecasts, but inexplicably continued showing up at work every morning rather than, say, swim to shore.

WALL STREET -- Economic forecasters spent the day explaining away their unanimous utter failure to predict the collapse of crude oil prices to $36 per barrel.

Ten banks surveyed in March predicted prices would recover to $50 or better in the fourth quarter. Instead, oil is in a rout that shows no signs of ending. How did market watchers get this so wrong? Analysts say they forgot that the price of a good is driven by the supply of it and the demand for it.

“We haven’t seen people simply try to produce more oil recently,” said Miranda Davis of Quintium Advisors, which manages $225 million. “The world was not prepared for that.” In fact, the world was, as signs at gas stations changed immediately; only the analyst community was baffled. Ms. Davis added that the downturn could last for years. “But don't quote me,” she added.

OPEC surprised analysts when it reacted to low prices by not forgoing business entirely, but in fact pumped the most in three years. Producers in the U.S. and Russia went right along with their lives too, rather than switch industries or pursue early retirement as predicted. Consequently, Paul Christopher of Wells Fargo now says that oil prices in 2016 will surge only up to $45-to-$55, while the EIA has reduced its prediction of the imminent increase as only reaching $50.89, impressing everyone by carrying its rank guess to two decimal places. The continuing calls for a price rally in the second half of next year echo similar forecasts made at the end of 2014, after which prices unexpectedly fell.

Though the riggers are still in the oil patch, many forecasters have indeed switched careers and are now forecasting in the field of climate change, where the direction of the move does not matter, only the magnitude, and a failure to get predictions right at all actually helps attract headlines and boost the settled science that “we need to take action now.”

Indeed, nearly the only safe jobs left in the forecasting industry are in government. President Obama's Council on Economic Advisers is predicting 2016 will feature a Summer of Recovery, as “the seventh time is a charm,” while his National Security Council is ready to predict next week that the world will get through 2015 without a single terrorist mass murder.

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