The global economy continues its journey of evolution and progression driven by industrialism as its primary force. With such a fast pace of development and recovery from several recessions over a number of years, dependency on energy sources became inevitable to satisfy the rising demand. This paper represents a proposed global energy price model that has the flexibility of modeling the energy price, using data from specific regions of the world, as well as the global energy pricing equation. The ANM (Alternate Novel Model) is presented here.
The model focuses mainly on oil price modeling, since oil accounts for more than 84% of the current world energy supply. The model duration is 50 years; starting from 1980 to 2030, model matching period from 1980 to 2011, and the prediction period is from 2012to 2030.
The modeling approach used in ANM adopts weighted averaging of individual factors and it relies on line regression technique. Therefore, future trends are being predicted based on the cyclic nature of the market and historical data "the future is reflection of the past??. ANM can then preduct the future oil prices, depending on the factors and variables that have been placed in the process for the output results.
The paper aims to propose a reliable model that accounts for most governing factors in the global energy pricing equation. All steps followed and assumptions made will be discussed in detailto clarify the working mechanism for this model and pave the road for any future modifications.
In 2005 a series of statistical calculations were presented for Canadian hydrocarbon prices . There were two main conclusions: long-term historical data indicates that hydrocarbon prices tend to revert back to historical averages, short-term price
fluctuations are unpredictable. It is more clear than ever that short-term prices are unpredictable, but this paper will attempt to demonstrate once more that mean reversion should be included in any long-term model.
This paper demonstrates that any discussion of oil and gas prices in Canada must consider inflation. Several different means of adjusting for inflation are presented but all show that Canadian hydrocarbon prices are strongly variable, but mean reverting. This paper also argues that, while convenient, discussing the price of a commodity in terms of only one currency ignores changes in the relative value between currencies and basis differentials. These factors can have significant economic impact.
This paper updates the previous price fluctuation model for prices up to the end of 2012. As before, the model incorporates a random walk with mean reversion that was developed and tuned to fit Canadian hydrocarbon prices. Starting with the current spot price, the model will generate a random but equiprobable prediction of future prices. The model can be used as input into a Monte-Carlo simulation. Alternately, the model can be run multiple times in order to generate "high??, "low??, and "expected?? price predictions.
This article, written by Editorial Manager Adam Wilson, contains highlights of paper SPE 146765, "Economics and Technology Drive Development of Unconventional Oil and Gas Reservoirs: Lessons Learned in the United States," by C.P. Flores, SPE, PB Energy Storage Services, and S.A. Holditch, SPE, and W.B. Ayers, SPE, Texas A&M University, prepared for the 2011 SPE Annual Technical Conference and Exhibition, Denver, 30 October-2 November. The paper has not been peer reviewed.