Commodity price forecasts The AER considers BIS Shrapnel's oil price forecasts do not represent the best forecast possible in the circumstances. BIS Shrapnel used futures prices to forecast oil prices. The AER has accepted this method of forecasting in past decisions. However, given new evidence, the AER considers that this approach is no longer reasonable nor the best possible in the circumstances. The AER also considers BIS Shrapnel's PE pipe price forecasts were not arrived at on a reasonable basis, and do not represent the best forecast or estimate possible in the circumstances. Oil Generally the AER has considered prices in futures markets provide a reasonable basis to forecast commodity prices. BIS Shrapnel used Chicago Mercantile Exchange (CME) futures prices to forecast oil prices. However a recent discussion paper from the Federal Reserve round that: More commonly used methods of forecasting the nominal price of oil based on the price of oil futures or the spread of the oil futures price relative to the spot price cannot be recommended. There is no reliable evidence that oil futures prices significantly lower the MSPE relative to the no-change forecast at short horizons, and long-term futures prices often cited by policymakers are distinctly less accurate than the no-change forecast. The no–change forecast is a forecast that predicts future prices will be the same as the current price. The paper also noted that over horizons of several years the no change forecast adjusted for expected inflation was a better predictor of nominal oil prices than futures, expert economic forecasts, and the unadjusted current price of oil. It is also noted in the paper that: This result is consistent with common views among oil experts. For example, Peter Davies, chief economist of British Petroleum, has noted that “we cannot forecast oil prices with any degree of accuracy over any period whether short or long” The AER is not satisfied the proposed oil price forecasts represent the best forecast possible in the circumstances. Based on this new research, the AER considers the best forecast or estimate possible in the circumstances is the expected change in the CPI.
Commodity price forecasts The AER considers BIS Shrapnel's oil price forecasts do not represent the best forecast possible in the circumstances. BIS Shrapnel used futures prices to forecast oil prices. The AER has accepted this method of forecasting in past decisions. However, given new evidence, the AER considers that this approach is no longer reasonable nor the best possible in the circumstances. The AER also considers BIS Shrapnel's PE pipe price forecasts were not arrived at on a reasonable basis, and do not represent the best forecast or estimate possible in the circumstances. Oil Generally the AER has considered prices in futures markets provide a reasonable basis to forecast commodity prices. BIS Shrapnel used Chicago Mercantile Exchange (CME) futures prices to forecast oil prices. However a recent discussion paper from the Federal Reserve round that: More commonly used methods of forecasting the nominal price of oil based on the price of oil futures or the spread of the oil futures price relative to the spot price cannot be recommended. There is no reliable evidence that oil futures prices significantly lower the MSPE relative to the no-change forecast at short horizons, and long-term futures prices often cited by policymakers are distinctly less accurate than the no-change forecast. The no–change forecast is a forecast that predicts future prices will be the same as the current price. The paper also noted that over horizons of several years the no change forecast adjusted for expected inflation was a better predictor of nominal oil prices than futures, expert economic forecasts, and the unadjusted current price of oil. It is also noted in the paper that: This result is consistent with common views among oil experts. For example, Peter Davies, chief economist of British Petroleum, has noted that “we cannot forecast oil prices with any degree of accuracy over any period whether short or long” The AER is not satisfied the proposed oil price forecasts represent the best forecast possible in the circumstances. Based on this new research, the AER considers the best forecast or estimate possible in the circumstances is the expected change in the CPI.
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