Estimation of Past Oil Price

estimation market oil price
New answer on Jan 08, 2020
2 Answers
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Anonymous A asked on Jan 06, 2020

What's up people? So I found a very unusual estimation task about oil prices. However, it refers to the past:

"Estimate the change in the price of oil in the year 2000 from today’s price. Will it increase or will it decrease?" (No more information provided)

What could a possible structure look like? I tried with demand and supply as well as with global economy welfare but can't come up with something that makes sense.

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Vlad
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replied on Jan 07, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

I would split into buckets and try to understand a trend in each of them:

Demand

  • Lack of internal resources (lack of researched volumes, extraction capabilities, higher costs)
  • Private consumption (Climate - heating and cooling, car ownership and usage, etc)
  • Industrial consumption (Growth and structure of the economy)
  • Alternative energy resources (Availability and adoption)

Supply

  • Oil&Gas resources availability (volumes, quality)
  • Cost of extraction (Labor, Taxes, Licenses, Technology)
  • Cost of transportation (Location, supply chain infrastructure, taxes and quotas)

Externalities

  • Regulatory organizations (e.g. OPEC)
  • Conflicts in the Middle East
  • Trading and speculative demand

Best!

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Clara
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replied on Jan 08, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Agree with Vlad´s framework of doing the overal Supply-demand and breaking it into little pieces -altough it has the risk of not being MECE, but it´s very complicated not to be so here-.

I would add in the external factors some more such as (1) international trading tensions/conflicts or (2) wars -that affect not only the supplying regions but also the transport, or any other political factor that can make a difference.

Hope it helps!

Cheers,

Clara

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Vlad gave the best answer

Vlad

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McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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