Goldman slashes oil price forecasts. Oil prices will fall to $30 a barrel in the next three months, Goldman Sachs said on Friday, as it lowered its calendar 2009 forecast for oil prices to $45 a barrel, down from a previous $80 a barrel prediction.. . . I was reminded that last spring, Goldman also predicted that oil was going to hit $200. So what does this teach us? My impression is that Goldman makes recommendations based on current momentum, and not accurate forecasting. After all, what is its excuse for not getting it right last spring? They would probably say: conditions have changed -- the economy has worsened, the credit crunch and ensuing financial collapsed has so dented the global demand for oil that the price will be depressed for awhile. To which I would respond: The economy was worsening when you thought it was fine; oil demand was decreasing already when you were predicting its increase would be continuous. Objective conditions haven't changed, your perceptions have changed.
It reminds me of this famous Zen koan:
Two monks were arguing about the temple flag waving in the wind.
One said, "The flag moves."
The other said, "The wind moves."
They argued back and forth but could not agree.
Hui-neng, the sixth patriarch, said: "Gentlemen! It is not the flag that moves. It is not the wind that moves. It is your mind that moves."
The two monks were struck with awe.