Energy Price Forecasting During Disequilibrium: Wasted Days and Wasted Nights?
by Crina Viju and William A. Kerr in Energy Politics Archives Spring 2009
Introduction: Energy Politics Working History Series
In the aftermath of the 2008 oil price collapse, when crude plummeted from over $130 to near $40 per barrel in just months, Energy Price Forecasting During Disequilibrium by Crina Viju and William A. Kerr captured the anxiety that gripped energy investors and analysts alike. This landmark article, reprinted from the School of Public Policy, stands as a sobering reflection on the limitations of economic models and industry forecasting tools when energy markets veer far from equilibrium. It offers both a theoretical and practical critique of traditional forecasting methods—ranging from econometric models to market sentiment and futures prices—and argues persuasively that none can offer reliable guidance during turbulent periods. In highlighting how disequilibrium breaks the assumptions embedded in most forecasting tools, the article challenges policymakers and market participants to rethink their reliance on such projections and redirect attention to what can be controlled.
Introduction
When oil prices were in the middle of their free fall in the latter part of 2008 – from over US$130.00 per barrel to US$40.00 per barrel – we were having almost daily discussions with a friend of ours who works for a boutique financial institution that specializes in arranging financing for energy projects and in providing a range of financial services for energy companies. Our friend has a graduate degree in financial economics and a bachelor degree in commerce. While she does not consider herself an economist, she has had considerable exposure to the discipline. Our conversations dealt with a different matter, but it was clear that the question of future oil prices was consuming her life. Of course, her judgements regarding future oil prices mattered a great deal to both decisions pertaining to investments in future energy projects and to the client firms that were paying for financial advice.
She spent many hours, or more realistically days, pouring over the ruminations of a wide variety of forecasters and energy pundits – from those who based their projections on sophisticated econometric models to those who professed profound confidence in the feeling in their gut. Her efforts produced a huge range of future prices, and from her perspective none which could be relied upon. An analyst that seemed to have a good record over a period of time, would suddenly be far off the mark. Forecasts of all kinds were revised with, from her perspective, alarming frequency and in radical ways. In the age of the internet, th re is no shortage of forecasts available. As a professional, she did not feel she could simply throw up her hands and admit that she was stymied.
Thus, her (long) days were spent gathering ever more forecasts and her (short) nights sleeplessly thinking about what she had read.
Read full article here.
Where to Now? (Update Summary, 2025)
Today, Viju and Kerr’s core insight—that disequilibrium undermines the reliability of price forecasts—rings truer than ever. Since the COVID-19 shock, the shale retrenchment, and Russia’s war in Ukraine, oil markets have been mired in persistent, overlapping disequilibria. Forecast dispersion and futures market volatility have intensified, echoing the periods of instability the authors analyzed. In response, more analysts now adopt scenario analysis, stress testing, and real options frameworks instead of single-point forecasts. Moreover, machine learning tools, while seductive in complexity, remain tethered to the same limits of historical data relevance during regime shifts. The question “Where to now?” thus remains unresolved—but the answer, as this prescient piece reminds us, may lie less in prediction and more in adaptive strategy.
About the Author:
Crina Viju is Assistant Professor Johnson-Shoyama and William A. Kerr Van Vliet Professor Department of Bioresource Policy, Business and Economics University of Saskatchewan Saskatoon, Canada
Reprinted from School of Public Policy University of Regina Regina, Canada, Department of Bioresource Policy, Business and Economics University of Saskatchewan Saskatoon, Canada, with the permission of Crina Viju and Kerr Van Vliet.