Rystad Energy: New Research Shows That Oil Markets Could be Stabilized

Rystad Energy has over the last year developed a model to give a more realistic simulation of the cyclical behavior of the oil price. The model has correctly predicted the oil price increase seen over the last months.

Now it shows that the oil price will be highly volatile going forward, but also that a swing producer can stabilize the market if the right heuristics are applied. The model is based on system dynamics, which is a mathematical approach to model the nonlinear behavior of complex systems based on feedback loops and time delays.

“I’m very happy to see that our model is able to capture the price behavior we actually see in the market,” Rystad Energy CEO Jarand Rystad says. “Traditionally, oil market predictions have been based on linear forecasting of supply and demand. The dynamic element generating the cyclicality of the business has been very difficult to capture in a mathematical model. Thus, I think this has been a real achievement. Instead of being surprised by the roller-coaster nature of the oil market, we can now understand such behavior and even model how the most volatile price cycles could be mitigated,” he adds…

 

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