Crude Oil Price Predictions Right on Track
So far, my crude oil price predictions are right on track. I predicted on January 1, 2015, that the price of oil would not sink much longer and that the price would rise in the second quarter to find its equilibrium somewhere between $60 per barrel and $80. The following crude oil price chart shows the price in January did, in deed, not go much lower than it was on January 1 and has risen now to $60 per barrel.
While West Texas Light (the benchmark for spot oil prices) took a brief dip in price at the start of the second quarter (slightly below its January low), it quickly rose from there throughout the second quarter to get back to $60 per barrel.
In writing the first draft of that article, I had originally predicted that oil would not drop below $40 per barrel. I wish now I had kept that in there, as it clearly did not.
How did my crude oil price predictions track with my job market predictions?
Because of what I anticipated in crude oil prices and their effect on the fracking industry, I also made the following prediction about the impact that crude oil prices would have on the job market:
The drop in oil prices will result in a loss of jobs in the oil industry (which has fueled job gains for the past two years). It will also cause a drop in businesses that built up around the oil boom towns, such as housing, restaurants and stores in boom towns. Those job losses will offset job gains expected by many in other industries. Those gains are expected because many think the economy is recovering but also because some industries may expand as a result of lower fuel costs, but that expansion will lag way behind the job losses in the oil industry as business expansion tends to move more cautiously than corporate cutting … in part because people don’t know how long the lower oil prices will hold. So, I expect to see a slump in the U.S. jobs market through the first half of the year.
As anticipated, job statistics have been completely lackluster this year, falling below the gains that had been seen in 2014. In fact, March’s mediocre jobs report was just revised down a lot to a dismal 85,000 new jobs.
The backward-running stock market has, of course, found these dreary job reports encouraging because they know that jobs drive the Federal Reserve’s stimulus choices. So, mediocre job reports will pressure the Fed remain in the money-printing, interest-binding position it has taken for years.
Friday’s stock market soared in response to this bleak news on the jobs front. Nevertheless, it failed to break that ceiling I’ve been talking about and began to sink again today. With the new money spigot now off and only low interest to run on, the U.S. stock market is sputtering to keep its head near that ceiling.
So, 2015 is running right as predicted so far: oil prices have risen to where I thought they’d be; the job market has sunk into mediocrity as a result, and the stock market proves every single week that it has topped out.