Forecasts are fickle, fraught with risk and yet, we love them

Your outdoor wedding is two weeks away and you're checking the weather forecast every hour. You just keep looking over and over, as if clicking on Environment Canada's web page 250 times will somehow fend off the threat of rain.

Your hockey pool is tomorrow night and you are printing out stacks of stats to complement the season-previewmagazines you have pored over. Armed with up-to-date info from the best hockey minds, there's no way you're going to let your office colleague win the pot this year.

Weather and sports are two examples of forecasts we regularly rely on, even though they frequently flounder. A "chance of showers"becomes a deluge, or the co-worker who doesn't watch hockey and has never studied a stat in his life wins the office pool.

Still, we are addicted to predictions the sales targets we're expected to reach, the economic outlook that promises more jobs, even theodd global doomsday prophecy.

No matter the topic, weindulge.

"The truth is that forecasts are like Pringles nobody thinks that there's any great virtue in them but, offered with the fleeting pleasure of consuming them, we find it hard to resist," wrote authorTim Harfordin theFinancial Times.

Too tempting

If you're in Alberta these days, it's hard to avoid the Pringles. The oilpatchis tryingto make sense of the downturn.

"Forecasting oil is a very difficult business. If it was easy and we were able to do it with any accuracy, we would all be on a yacht in the south of France," said AlbertaEnvironment MinisterShannon Phillips.The government's fallbudget forecast oil prices at$50 US a barrel this year and $61 US in 2016-17. Currently, prices sit just above $30 US a barrel.

Even high-level executives running oil companies aren't sure where prices will go. Imperial Oil CEO RichKrugeradmittedlast May, "I don't have a clue."

• Oilpatch stares into the abyss, tries to make sense of its future
• Moody's reviewing ratings on oilpatch companies

Fickle markets

The variables involved in pinpointing the future for oil are just as complex as picking the next Stanley Cup MVP, if not more so.

There arelayers of complexity. On aglobal scale there are supply and demand, geopoliticsand shifting energy trends. On a local or regional level one must consider oiltransportation, price differentials, quality differentialsand refinery locations.

"It's a new century, it's new geopolitics, assumptions are turned upside down. We're looking at volatility, painas well as the gain associated with world markets," said Ed Morse,the global head of commodities for Citi Research.

The convoluted situation represents anear labyrinth of possible outcomes, which doesn't seem to deter audiences at all.

This month, two differentevents with oil forecasters in Calgaryhave been packed, leading to jokes about how eager people are to hear the "good news."

Forecasters didn't see oil prices crashing this badly, and yet people are flocking to these experts to hear the new projections.

Michael Wittner, with Socit Gnrale, explains his role as an oil forecaster

9 years ago

Duration 1:02

Oil forecaster Michael Wittner on what people are looking for in his presentations

Craving information

Just like in sports, the brightest minds in the industry get itwrong, over and over again.

"Certainty is difficult to come up with right now," saidMichael Wittner, the head of oil researchwithSocit Gnrale, in an interview with CBC News."Far and away the goal is to try and get it right. Obviously, neither we nor anyone else I think has gotten it right so far."

At minimum, forecasters need toexplain what has happened in the market to get us to the present time. Thenext step is the prediction.

• 4 oil forecasters point which way prices will go
• $100 oil: Will we ever see it again?

FirstEnergy Capital's Martin King seems to enjoyplaying with people's love, hate and lust for crystal ball gazing.

His presentation at a recent Conference Board of Canada event was titled"Positioning for a price recovery."

"I didn't specifically say when the price would recover," he quipped to the crowd."I'm glad I didn't get specific about that."

These types of events are information exercises, as they methodically go over dozens of charts and graphs to tell the story ofwhere have we been, where are we now, and where we are going to go.

Forecastsare generally serious, since much is at stake. Oil executives are trying toget a sense of where to set their budgets and possiblyhow to take advantage of a recovery.

"Everybody is going to have their own opinion on it, of course. But it's always good to have more information than less," said King.

Forecasts are always fraught with danger. Make a bold prediction, likeeconomist Jeff Rubin calling for oil at $200 a barrel, and it can follow you aroundfor years to come. But if you're only off by a little bit, you can always cover your tracks with phrases like "prices overshot to the downside."

If the energy industry's crystal ball gazing seems to need some work, it's in good company. For instance, the Hockey News, a highly respected publication, unveiled its annual NHL predictionslast summer.

The Florida Panthers were set for mediocrity and to finish fifthin their division. Currently, they are first in the Atlantic.The Winnipeg Jets were said to have a60 per cent chanceof making the playoffs. Right now, they are basement dwellers in the Central.

Do we blame the Hockey News for these problematic prognoses?Probably not. Manyof their predictions are right on the money. The variables in sports are numerous with injuries,trades and the like.

Besides, the masses will keep flocking back to hear the latest prophecy, the irresistibledivination to make sense of where this world is headed. Right or wrong, we just can't pass it up.