Making Strategic Finance Decisions in a Volatile Oil Market
This article was originally published in January 2015.
The oil and gas (O&G) industry has recently seen incredible volatility in oil prices. Large price swings, especially those due to geopolitical and macroeconomic events, are difficult to predict. As such, O&G modeling faces a challenge not seen in other industries. Financial modeling with unknown inputs is difficult, and answers provided by models may by inaccurate when inputs fall outside of consensus estimates. Therefore, it is necessary to be able to calculate bottom line impacts on a company given a variety of different assumption changes within a model.