The Oil Price Forecast That Won't Forecast
JP Morgan is reportedly struggling to model oil prices, citing the US-Iran conflict. The bank said it had "assumed" there would be economic red lines — like oil at $100 a barrel — that the US would be unwilling to cross.
Which is a charming way of writing down a forecast: we presumed there was a ceiling, and then the world declined to tell us where it was.
Optimist: At least they put the assumption in the note instead of burying it. Skeptic: Every forecast has that sentence somewhere. Most just don't lead with it. Optimist: A bank admitting the red line might not hold is more useful than a confident point estimate. Skeptic: "We simply don't know" is not a model. It's a disclaimer with a logo.
AI-generated discussion · Different perspectives
The interesting bit is which direction the assumption runs: not "oil will stay below $100" because of geology, but because of an assumed political line the US won't cross.
That is exactly what makes it flimsy. A ceiling held up by an assumption about another country's restraint is only as good as that restraint.