How correct were they? – a comparison of logistics/supply chain practitioner and educator views of near-term oil price with the actual oil price

Abstract

Purpose: Previous research (Bentley et al., 2016 & 2017) investigated the views of logistics and supply chain (SC) managers, and educators teaching these disciplines, about the impact of recent changes in oil price on these industries, and also their expectations of future oil price, and hence anticipated impacts. In this paper we look at how the opinions held by these groups on near-term oil price turned out, when compared to the oil prices that actually occurred. Given that the International Energy Agency (IEA) and others forecast that the oil price will rise significantly in real terms over the coming years, the purpose of this research is to better understand how well professionals associated with these industries are able to anticipate oil price change, and hence correctly plan for likely impacts. Research Approach: The research draws on three main rounds of surveys carried out from early 2016 to the end of 2017 at a range of UK and international logistic and SC events and conferences. The surveys used semi-structured questionnaires issued and collected personally. This adopted the ‘key informant’ approach, ensuring that only the target audience – here, of middle and senior managers in logistics and SC companies, and senior lecturers and above in universities - were surveyed, and that a high response rate - here, >90% - was achieved. The questionnaire was kept short and anonymous to assist this high take-up rate, with some 70 valid questionnaires being analysed by both qualitative and quantitative methods. Findings and Originality: This research is recent and original. Based on our previous findings, we know that these practitioners and educators forecast a surprisingly wide range of oil prices in both the near and medium term; for example, expecting the oil price 10 years from the survey date to range from below $30/bbl to above $120/bbl; and giving corresponding explanations for this diversity of view. In this paper we find that over the period surveyed the forecasts made by these groups consistently underestimated the oil price rises that actually occurred. The analysis discusses the likely factors driving both the wide divergence of views on future oil price, and also why the forecasts of this price have so far turned out to be too low. These findings are presented in the context of IEA oil price forecasts, and the under-recognised fundamental constraints that drive changes in oil price. Research and Practical Impacts: Such a wide range of views on the likely future price of oil has significant implications in terms of correct planning of future company operational practices, and, importantly, in optimising major long-term investment decisions. Hence improving the understanding of the correctness of expected future oil prices - as analysed in this paper - has the potential to improve decision-making, and hence profitability, across the logistics and SC industries.