Fuel Prices: Headed for a Bull Market

 

The price cycle is turning skyward for gas, coal, and crude oil.

These days you don't have to do much searching to find different fuel price forecasts and approaches used in developing them. These different approaches and methods-forward curves, econometric, mean reversion, and random walk models-make it difficult to decide which forecast is likely to be the best. Many of the current long-term fuel price forecasts are constrained by the short-term perspective of the forecaster. After more than 25 years of observing and studying the energy markets, it is highly likely that fuel prices will increase dramatically over the next 10 years. This belief is not based on complex algorithms, but on market fundamentals.

What We Learn from History

When facing an uncertain future, the past can often serve as a guide. Those who look back before they look ahead are often better prepared. Beginning with the last energy crisis in the mid-1970s, Black & Veatch has spent considerable effort in trying to understand and evaluate the underlying factors that influence energy prices.¹ This has included an examination of the numerous crude oil and coal price cycles that have occurred since the mid-1800s.