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Why Oil Prices Are High Today Tells Us Where They Will Go Tomorrow

June 15, 2018

Via: Forbes

Again and again, market observers have been confounded by their inability to differentiate between transient events and long-term, physical constraints. After the first oil price increase in 1973, many argued for mean-reversion and thus were discredited when prices soared during the 1979 Iranian Oil Crisis. After that second price spike, there was near-unanimous consensus that oil prices must continue to rise because of insurmountable supply constraints, which of course proved completely wrong. The lesson is not that prices can’t be forecast, but what matters is why a forecast was right or wrong. Napoleon preferred generals who were lucky rather than smart, but he wound up on St. Helena Island, after all.

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