Predicting Oil Prices with accuracy is a difficult task. They’re extremely sensitive, even compared to the stock market. Shocks in global demand and supply can have a substantial impact, with accurate oil price forecasting requiring knowledge of the Middle East’s oil production.

The past decade alone has seen seismic shifts in the oil industry, making the prediction aspect even more difficult. India, China and Brazil are expediting world GDP growth alongside oil demand, with oil prices escalating $100 a barrel from 2001 to early 2008. Then, during 2009’s Great Recession, oil prices dipped to $50. Today, oil prices by the barrel are hovering around $70.

Growing Demand vs. Growing Supplies

The ample fluctuations in oil prices showcase the ever-changing nature of the oil industry. Long-run oil prices are contingent on the race between growing supplies from global shale oil deposits and growing demand in emerging economies. There’s much more to it though.

For example, the development of fracking for obtaining oil and gas strives to reduce the U.S. trade deficit and provide jobs for U.S. workers. As a result of shale oil’s development, North American oil production is increasing by millions of barrels per day, comparative to before fracking led to the extraction of oil and gas out of oil shale.

Additionally, political factors are always at play. Countries like Mexico have undergone replacing a state oil monopoly with a privatized solution instead. These political moves have an undeniable impact on oil prices, with Mexico’s reform resulting in falling oil prices.

The Reason for Bullish Oil Predictions

Anyone forecasting bullish oil prices can guide themselves by a belief that finite resources must always increase in price. Additionally, there’s often a belief that increasing oil demand in countries like China will cause costs to rise.

None of these assumptions are imminent, though, since oil prices are so dependent on world events and politics. For example, the 2003 Iraq War is responsible for a lengthy loss of oil production, in addition to other events, like the 2002/3 strike in Venezuela, Hurricane Katrina, the Macondo Disaster and the Arab spring cutting off an amount of crude from Libya.

Most of these events are difficult or impossible to forecast. Considering these fairly unpredictable events influence oil production significantly, the result is that oil prices are similarly unpredictable.

New Opportunities in Oil

Forecasting oil prices with success is also contingent on recognizing new opportunities in oil. For example, companies continue to drill horizontal development oil wells throughout West Virginia. Paying attention to efforts of companies both globally and domestically plays a large role in making accurate forecasts.

Similarly, staying up to date on current events is immensely important. The Trump administration has a very different take on energy from the Obama administration. The seemingly imminent collapse of the Iran nuclear deal may propel oil prices significantly. Shifting political administrations in countries with ample oil dependence always have an impact on oil prices, with this new administration proving no different.

Predicting oil prices is very difficult, though considerable attention toward emerging oil opportunities, geopolitical relations and emerging techniques like fracking can provide ample insight into where oil prices are potentially going next.

Scott Huntington is a writer from central Pennsylvania. He enjoys working on his home and garden with his wife and 2 kids. Follow him on Twitter @SMHuntington