Preliminary Results for Forecasting the Oil Price Evolution with Negative Inflation Rate, 6, pp. 1491-1496, IMECE2012-86729

Mass conservation equation is employed to study the time evolution of the mass of oil remaining in a reservoir, according to the mass flow rate of extraction, and to define the critical mass flow rate of extraction, which is the value exhausting the reservoir in an infinite time. The price evolution with time of the resource sold to the market is investigated in case of no-accumulation and no-depletion of the resources; i.e. when the resources are extracted and sold to the market at the same mass flow rate. The energy conservation equation is transformed into an energy-capital conservation equation, which allows to study the oil price evolution with time, dependent on the following parameters. The parameter PIFE, “Price Increase Factor of Extracted resource”, is the difference between the basic interest rate of the capital, e.g. inflation rate, and the mass flow rate of extraction. The parameter PIFS, “Price Increase Factor of Sold resource”, is the difference between the interest rate of the capital, e.g. prime rate, and the mass flow rate of extraction. The parameter CIPS, “Critical Initial Price of Sold resource”, depends on the initial price of the extracted resource, the interest rate of non-extracted resource, and the difference between PIFS and PIFE. The parameter CIPES, “Critical Initial Price Extreme of Sold resource”, depends on the initial price of the extracted resource, the interest rate of non-extracted resource, and PIFS. The present theory is applied to the time evolution of the oil price during the years following the economic crisis of 2008, introducing the new category of cases with a negative inflation rate, that was registered during 2009. The present theory can be applied also to the months with negative inflation rate with a reasonable fair agreement