In the absence of a major financial meltdown, oil will end 2016 north of $60 a barrel,” this column stated at the turn of the year. It was a forecasting flourish possibly fuelled by one Christmas brandy too many. With just four months of 2016 to go, though, I’m sticking to my Yuletide view.
Attempting to predict the oil price is crazy. Yet no decent economist can afford not to. The world economy still revolves around oil – used in everything from transport and electricity generation to the production of plastics, synthetics and so much else. And for all the breathless talk about renewables, and the grim inevitability of growing nuclear dependence, we remain addicted to oil.
Forecasting the oil price, as I’ve often said, is a mug’s game. But the cost of the black stuff is so important – central not just to transport and electricity generation, but also agriculture, the production of plastics and synthetics and so much else – that any self-respecting economist simply must take a view.
“In the absence of a major financial meltdown, oil will end 2016 north of $60 a barrel,” this column asserted at the turn of the year, possibly after one Christmas brandy too many. Despite yuletide excess, I’m sticking to that view.
Last week oil jumped above $44 – it’s highest level so far in 2016. Having sunk to a 12-year low in mid-February, crude prices have since risen 40pc. The Opec oil exporters’ cartel is now trying to forge an output-limiting agreement, ending a two-year supply glut and pushing prices further up. So, all eyes are on today’s Opec summit in Doha.
The outlook for the American economy is improving. That was the message from the Federal Reserve last Wednesday, as the US central bank issued new forecasts showing faster GDP growth and lower unemployment. But no, America’s economic prospects are actually getting worse. That was the clear implication of disappointing official growth numbers published less than 48 hours later. The US economy expanded 2.2pc during the first quarter, we learnt, well-below market expectations and sharply down from the 3pc growth rate notched-up during the final three months of 2011.
The economic news flowed thick and fast last week. The UK has just slipped back into recession, albeit on preliminary first quarter data. The eurozone too, continued to vex financial markets, with Sarkozy now in serious danger of losing the French Presidency and the “hard-as-nails” Dutch government quitting after rows over tighter spending plans.