Future Oil Prices, Where to? A Systematic Modeling Tool for Decision Makers
- Hadi Arbi Belhaj (The Petroleum Institute)
- Document ID
- Society of Petroleum Engineers
- SPE Kuwait International Petroleum Conference and Exhibition, 10-12 December, Kuwait City, Kuwait
- Publication Date
- Document Type
- Conference Paper
- 2012. Society of Petroleum Engineers
- 4.1.2 Separation and Treating, 7.4 Energy Economics, 4.6 Natural Gas, 4.1.5 Processing Equipment, 7.4.3 Market analysis /supply and demand forecasting/pricing
- Price prediction, Gas prices, Modeling, Energy prices, Oil prices
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- 227 since 2007
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The global economy continues its journey of evolution and progression driven by industrialism as its primary force. With such a fast pace of development and recovery from several recessions over a number of years, dependency on energy sources became inevitable to satisfy the rising demand. This paper represents a proposed global energy price model that has the flexibility of modeling the energy price, using data from specific regions of the world, as well as the global energy pricing equation. The ANM (Alternate Novel Model) is presented here.
The model focuses mainly on oil price modeling, since oil accounts for more than 84% of the current world energy supply. The model duration is 50 years; starting from 1980 to 2030, model matching period from 1980 to 2011, and the prediction period is from 2012to 2030.
The modeling approach used in ANM adopts weighted averaging of individual factors and it relies on line regression technique. Therefore, future trends are being predicted based on the cyclic nature of the market and historical data "the future is reflection of the past??. ANM can then preduct the future oil prices, depending on the factors and variables that have been placed in the process for the output results.
The paper aims to propose a reliable model that accounts for most governing factors in the global energy pricing equation. All steps followed and assumptions made will be discussed in detailto clarify the working mechanism for this model and pave the road for any future modifications.
Energy price modeling is a part of a broad economic scientific sector called Energy Economics, which includes topics related to supply of such a commodity and use of energy in societies. Due to diversity of issues and methods applied and shared with a number of academic disciplines, energy economics does not present itself as a self-contained academic discipline, but it is rather an an applied sub-discipline of economics, that is strongly related to other economic sectors such as econometrics, environmental economics, finance, industrial organization, microeconomics, macroeconomics and resource economics. Furthermore, it is heavily dependent on results obtained from energy engineering, geology, political sciences, ecology etc.1
Petroleum resources such as oil and gas are the primary contributors to the world energy demand, as illustrated in figure 1. Therefore, by modeling the price for such resources, over 50% of the global energy demand will be catered for.
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