It has come to my attention that Treasury is not really interested in making an effort to forecast oil prices, despite the fact that the rest of New Zealand places huge faith in the Budget Economic Forecast Update, or BEFU. Historically I have been reluctant to make any forecasts, but today, I am going to predict what Treasury is going to predict tomorrow. The reason I can be so cheeky is because it only took me twenty minutes to work up the forecast, (copying the data from the NYMEX futures site), and that appears to be about all the effort our Treasury puts into forecasting one of our most important economic inputs.
Frog’s BEFU, the new trendline on a chart that many readers will now be familiar with, may in fact be a little high on the graph, as I suspect that printing deadlines mean that Treasury had to use futures data from a few weeks ago. Nevertheless, the shape of the curve will likely be about the same. You see, the futures market just cannot get its head around the idea of peak oil, so whatever today’s price is, is pretty much what the futures market says will be the price for the next five years. (a flat line) This trendline uses yesterday’s data, which has already been superceded by today’s high of US$129/bbl.
Some in the MSM have accused the Greens of being gleeful whenever the price of oil surges. While there is a gleam in my eye with every new high, I assure you that it is one of horror. No one can say that oil production has peaked until after the event. However, there is lots of evidence that we are now at or very near the peak, and this rally of oil prices feeds that fear. Why the fear? Because we are so woefully unprepared for a life of limited cheap energy. The consequences of our denial could be quite severe. I pray that the peak is really a long undulating plateau and that we get our house in order fast. It is beyond urgent.