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Wartime Forecasts

By Jackie Greene on March, 29 2022

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Jackie Greene

Jackie is the Vice President of Economics at ITR Economics, and oversees forecasting and applied research.

You’re going to be noticing something a little different from our forecasting. In our effort to guide you through these especially tumultuous times, we are starting to issue "wartime forecasts."

This type of forecasting is similar to what you’ve relied upon us for during other periods of uncertainty – such as the pandemic. With these wartime forecasts, we continue to offer you guidance by keeping you up to date with an unbiased view. As soon as we know something, we share it with you. We are dedicated to serving as that same dependable lighthouse through yet another time of economic uncertainty.

What does this mean?

With the war in Ukraine, there has been a noticeable shift in pricing; gas prices at the pump are a prime example. These pricing trends are not adhering to economic fundamentals; rather, they are being heavily influenced by war-related factors.

Our mission is to provide you with the best, most up-to-date forecasts possible as the war in Ukraine and related events unfold. Clients, Trends Report™ subscribers, and ITR Insiders™ may see more frequent revisions to some forecasts, particularly for commodity prices, as war-related factors change. Some things to keep in mind for each of these forecasts:

  1. The human loss of life is tragic, and our hearts break for the people impacted. Our analysis and forecasting are in no way meant to minimalize the tragedy that is occurring.
  2. Our role as economists is to provide you with an unbiased outlook.
  3. We have years of experience forecasting through prior wars.
  4. Examination of prior instances of war and other supply disruptions (real and anticipated) indicates that prices are not likely to be at normal "economic" levels through the next four quarters, should the war continue that long.
  5. We are not predicting how long the war will persist.
  6. We will adjust our forecast using normal economic fundamentals when the war ends or the disruptive pressures have eased.
  7. If the war escalates within Ukraine or spreads beyond Ukraine’s borders, we will need to reassess the forecasts.

US Crude Oil Spot Prices

One of the first wartime forecasts that we are issuing is for US Crude Oil Spot Prices. Prior to the war in Ukraine, we had been anticipating the Oil Prices 3MMA (three-month moving average) would peak in the high $80s per barrel during the third quarter of this year. Prices were then projected to ease back into the high $70s by the end of this year. Now our latest forecast has Oil Prices staying above $100 for the rest of this year. There will be fluctuations in daily activity, but we expect Prices rise to be a defining trend this year.

The good news is that the US consumer is strong. The consumer will bear the increased costs at the pump and the related impact to the cost of other goods. Our analysis indicates that the higher oil prices we are projecting will not push the US economy into a recession in 2022.

However, be mindful that the increased energy costs could push some consumers to seek less-expensive alternatives. Consumers are not ready to give up on going out to eat, but some may choose restaurants that are more budget friendly. You do not want to compete for business on price alone, but you do need to ensure you have budget-friendly options or, if your prices are relatively higher, strong competitive advantages that help customers justify the difference.

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