04-01-2022, 04:17 AM
Forecasting Fuel Prices: Best Methods?
<!-- SC_OFF --><div class="md"><p>I‘m looking to forecast fuel prices for a long term play in the downstream energy sector. I want to forecast pricing 5 years out.</p> <p>The approach I plan on taking is to look at historical refined product cracks (the spread between crude and gasoline/diesel) over the last 4 years and average them out, I will then layer on demand destruction on gasoline using a 1 to 1 application of demand destruction to pricing (i.e. if demand is forecasted to drop by 1%, refined product margin will drop 1%) and the same for diesel (where demand likely increases). After that I can take that and apply those margins to an aggregate of crude forecasts that exist out there (I don’t want to get into trying to predict oil prices) which should then give me a total product price which I can then apply inflation to. Once I have product prices, I might adjust the demand destruction assumptions if prices are forecasted to test all time highs.</p> <p>Does that sound logical to the experts out there? Seems pretty simplistic but it’s how I used to do it in my former life. I’m curious if there are ways to improve this.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/BreastMilkPopsicles"> /u/BreastMilkPopsicles </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tt5bis/forecasting_fuel_prices_best_methods/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tt5bis/forecasting_fuel_prices_best_methods/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>I‘m looking to forecast fuel prices for a long term play in the downstream energy sector. I want to forecast pricing 5 years out.</p> <p>The approach I plan on taking is to look at historical refined product cracks (the spread between crude and gasoline/diesel) over the last 4 years and average them out, I will then layer on demand destruction on gasoline using a 1 to 1 application of demand destruction to pricing (i.e. if demand is forecasted to drop by 1%, refined product margin will drop 1%) and the same for diesel (where demand likely increases). After that I can take that and apply those margins to an aggregate of crude forecasts that exist out there (I don’t want to get into trying to predict oil prices) which should then give me a total product price which I can then apply inflation to. Once I have product prices, I might adjust the demand destruction assumptions if prices are forecasted to test all time highs.</p> <p>Does that sound logical to the experts out there? Seems pretty simplistic but it’s how I used to do it in my former life. I’m curious if there are ways to improve this.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/BreastMilkPopsicles"> /u/BreastMilkPopsicles </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/tt5bis/forecasting_fuel_prices_best_methods/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/tt5bis/forecasting_fuel_prices_best_methods/">[comments]</a></span>Kind Regards R