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Roland Berger analysis: Oil-exporting countries' budgets indicate oil price rise of as much as 15% in 2012

Munich/Amsterdam, February 2, 2012

  • Mexico, Saudi Arabia and Russia expect an average price of USD 111 per barrel of crude oil in 2012
  • This is a 15% rise versus 2011
  • In 2011, the oil price rose 20% versus 2010
  • Estimates by Mexico, Saudi Arabia and Russia have been the most reliable predictor of oil price trends since 1999

Since its lowest point in the first quarter of 2009, when a barrel of crude cost just cost USD 34, the price has climbed higher and higher. According to Mexico, Saudi Arabia and Russia, the most reliable forecasters of oil price development in the past, this trend will continue in 2012. They expect the average price of a barrel of crude oil to reach USD 111 this year, a 15% rise year on year. This is the conclusion of a study, "What best performing forecasters think", by Roland Berger Strategy Consultants, conducted for the fifth year in a row.

"This time last year, the Arab Spring sent the oil price soaring," explains Arnoud van der Slot, Partner at Roland Berger Strategy Consultants. The oil price rose early in 2011 to just over USD 100. During the year, it stabilized at an average of USD 95 a barrel, 20% higher than in 2010.

A barrel of crude oil now costs around USD 100. But oil exporters Mexico, Saudi Arabia and Russia forecast a sharp price rise in 2012. With forecasts of between USD 97 and 120, this means an average price of USD 111 per barrel in 2012. Compared to recent years, there is less of a consensus on the price among the top three predictors. "Global economic insecurity and political unrest in several key oil countries certainly play a major role," thinks Van der Slot.

Reliable predictions by key oil exporters

Looking at the oil price in 2011, we can see that the forecast oil prices deviated on average 17% from the actual price. Among these predictions, those of Norway, Saudi Arabia, Nigeria and Russia as well as the Energy Information Administration (EIA) came within 10% of the actual oil price.

For the period 1999-2011, Mexico, Saudi Arabia and Russia were the most reliable predictors of oil prices. In this period, the three countries were on average just 9.3% off. By contrast, estimates by the commodity futures exchange (NYMEX) and distinguished institutions such as the Energy Information Administration (EIA) and the International Energy Agency (IEA) were almost twice as far from the actual price (almost 23% off).

"This trend clearly shows that for many years, market players have been producing oil price forecasts that are too low," says Van der Slot. "The oil-exporting countries instead use oil price forecasts in their national budgets to balance their future spending against expected income. In these forecasts, they use a margin of safety to minimize the risk of budget shortfalls." In its analysis, Roland Berger Strategy Consultants found out that these forecasts, including the margin of safety, can be a viable alternative source of oil price forecasts.

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