Here we go again–the latest round of oil price predictions are washing over us like a wave of uncertainty.

First, we have the US Dept. of Energy’s Short-Term Energy Outlook, which was updated just a few days ago with predictions of oil averaging $100.61 in 2008 and $92.50 in 2009.

Second is Citigroup and their projections of $96 for 2008 and $88 for 2009. As the Bloomberg article above points out:

The revision makes Citigroup’s 2008 forecast seventh- highest among 30 analyst estimates submitted to Bloomberg News. Merrill Lynch & Co. holds the highest prediction, with an estimate of $102 a barrel. Seven other banks have revised their price outlooks this month.

Third on our hit parade is a comment from Tim Guinness, an “experienced commodity investor”, that oil could potentially hit $150 in five to 10 years before falling back thanks to a demand shock. Notice that the above article quotes Guinness as saying something even more “shocking” (my term, not theirs):

He said: ‘The oil price is currently at around $106 a barrel, but energy demand from emerging economies is a near irresistible force, and we are unlikely to see a curbing of demand without a $150-$200 spike.’

Last, but not least is Lehman Brothers, which projects lower prices, with some additional views from Goldman Sachs and our friend, Matt Simmons:

Most investment banks have forecast the oil price will continue to rise but Lehman Brothers has opted to stick to its view prices will weaken “significantly” through the rest of this decade after peaking in 2008.

It forecasts crude oil will average at $105 in the third quarter of 2008 before settling down to $80 in the fourth quarter of 2008 and the first quarter of 2009. Figures from its Energy Special Report show the firm expects the price to average at around $84 from the fourth quarter of 2008 up to 2009.

Lehman Brothers’ stance contrasts with the views of other investment banks such as Goldman Sachs, which forecasts the oil price to reach $200 by 2010.

…

Simmons said global demand, despite the US financial turmoil, was now growing much faster than could ever be sustained – which would lead to continued high prices. Lehman Brothers’ prediction, on the other hand, is based on a study that shows demand from the OECD countries as well as China will drop.

It said OECD demand would fall by 100,000 barrels per day in 2008 and 2009 in contrast to its original projection of a 300,000 bpd one-off rise this year and flat demand in 2009.

“Combined with a minor downward revision to our original China demand projection, we now project total non-OECD demand growth of 1.2 million bpd this year, pulling 2008 total global demand up by 1.1 million bpd, a drop of 400,000 bpd from our original forecast in December,” the report said.

Over the longer term a number of leading indicators point to weakening prices as leading demand indicators trend downward, Lehman said.

“Many oil market bulls hold that emerging market demand will continue growing apace. However, even expanding Asian economies can show pullback, as evidenced by Japan and South Korea, which consume less oil now than at their 1973 and 1997 respective peaks,” the bank said.

So, what to make of this potpourri of petroleum prognostications?

Longtime readers are probably expecting me to climb on my soapbox at this point and scream and wave my arms about how insane it is to make such faux precise predictions. Those projections are laughable, in that they try to quantify (in the case of the US Dept. of Energy, down to the penny) something that’s susceptible to such a wide range of influences, including many in the political and weather arenas, that a correct projection is more akin to winning the lottery than making an accurate analysis.

It’s obvious why so many entities make these projections, of course–there’s a huge demand for them. The disposition of several small mountains of money depend on decisions that are influenced by “knowing” the price of oil in advance, even if everyone else “knows” it as well. So we all make believe that the crystal ball set can actually see not just into the future but around corners, and we tell ourselves that Here Be Truth. And then people like me blog about it and ridicule the whole process, while making my own projections. Ain’t life grand?

But back on point…

The general notion of oil prices remaining pretty much where they are in 2008 feels right to me, but only if we assume that we won’t have any inconveniently placed hurricanes, no new wars, no relevant terrorist attacks, etc. to jostle the chess board.

The conventional wisdom seems to be that nearly everyone is expecting a slight loosening of the market in 2009. I’m less confident in this view than I am in the 2008 projections. We very well could see the price decline slightly, based on some new production coming online and/or some slowdown in the rising oil demand from China and the oil exporting countries. But notice that our list of assumptions and the susceptibility of any projection to them are both growing; you could easily make an argument for non-US demand continuing to grow, coupled with ongoing declines in production from large, older fields resulting in the price of oil rising by another $10 to $20/barrel. And that’s without factoring in any further erosion in the US dollar. (While I’m on the topic–anyone care to guess what the swearing in of a post-Bush president will do to the US dollar? Pick your candidate and name your exchange rate!)

I think the most pertinent points made in the material I quoted above came from Simmons and his “oil is still cheap” shtick (which he finally expressed as something other than his endlessly repeated “15 cents per cup” metric; Matt: call me, we’ll work on some new lines), and Guinness’ observation that it will take a pretty high price, compared to current levels, to significantly cut demand.

On the latter point, note that in the US, even current record-high oil prices still leave US consumers paying nowhere near the same percentage of their income for energy that we did in the early 1970’s. People are complaining about gasoline prices now, but I very clearly remember how much worse it felt in the two oil shocks of the 1970’s/80’s. We will have to get to that level of economic pain before it forces many people to take the kind of easy, cheap, and painless conservation steps I type about here until my fingers bleed. Yes, a lot of early adopters and more enlightened consumers are making changes already (or never had to make them in the first place)–ask the Big Three how those truck sales are doing–but many more are still in denial and will remain there until the market delivers the second or third or fourth mule kick.

So hang on to your keyboards, people. As one of our frequent contributors reminded me the other day, our collective energy future will be a lot of things, but “dull” isn’t on the list.