Batmen not as interesting as it seems
Super-informative ping-pong graphic

The surprising impact of mixing chart forms

At first glance, this Wall Street Journal chart seems unlikely to impress as it breaks a number of "rules of thumb" frequently espoused by dataviz experts. The inconsistency of mixing a line chart and a dot plot. The overplotting of dots. The ten colors...

Wsj_oilpredict_Feb16

However, I actually like this effort. The discontinuity of chart forms nicely aligns with the split between the actual price movements on the left side and the projections on the right side.

The designer also meticulously placed the axis labels with monthly labels for actual price movements and quarterly labels for projections.

Even the ten colors are surprisingly manageable. I am not sure we need to label all those banks; maybe just the ones at the extremes. If we clear out some of these labels, we can make room for a median line.

***

How good are these oil price predictions? It is striking that every bank shown is predicting that oil prices have hit a bottom, and will start recovering in the next few quarters. Contrast this with the left side of the chart, where the line is basically just tumbling down.

Step back six months earlier, to September 2015. The same chart looks like this:

  Wsj_oilpredict_sept15

 Again, these analysts were calling a bottom in prices and predicting a steady rise over the next quarters.

The track record of these oil predictions is poor:

Wsj_oilpredict_sep15_evaluated

The median analyst predicted oil prices to reach $50 by Q1 of 2016. Instead, prices fell to $30.

Given this track record, it's shocking that these predictions are considered newsworthy. One wonders how these predictions are generated, and how did the analysts justify ignoring the prevailing trend.

Comments

Ken

Unfortunately most of this type of forecasting seems to be a combination of extrapolation and guesswork. It is not unsurprising, considering the financial and political factors that affect oil prices and similar. One possibility for oil prices is that Saudi Arabia will cut production to raise prices. When they do that will depend on a lot of factors. One major one will be that it will generate higher incomes for countries that they aren't on friendly terms with. So who knows when or by how much.

The comments to this entry are closed.