Future Oil Prices, Where to? A Systematic Modeling Tool for Decision Makers

Abstract

The global economy continues its journey of evolution and progression driven by industrialism as its primary force. With such a fast pace of development and recovery from several recessions over a number of years, dependency on energy sources became inevitable to satisfy the rising demand. This paper represents a proposed global energy price model that has the flexibility of modeling the energy price, using data from specific regions of the world, as well as the global energy pricing equation. The ANM (Alternate Novel Model) is presented here. The model focuses mainly on oil price modeling, since oil accounts for more than 84% of the current world energy supply. The model duration is 50 years; starting from 1980 to 2030, model matching period from 1980 to 2011, and the prediction period is from 2012to 2030. The modeling approach used in ANM adopts weighted averaging of individual factors and it relies on line regression technique. Therefore, future trends are being predicted based on the cyclic nature of the market and historical data "the future is reflection of the past". ANM can then preduct the future oil prices, depending on the factors and variables that have been placed in the process for the output results. The paper aims to propose a reliable model that accounts for most governing factors in the global energy pricing equation. All steps followed and assumptions made will be discussed in detailto clarify the working mechanism for this model and pave the road for any future modifications.