Another Look Ahead
Business Week recently published their 2005 Industry Outlook. There's not much to quibble with in their view of the energy industry, though it does focus heavily on the issues that produced the conditions we saw in 2004, rather than trying to anticipate any surprises in the new year.

In particular, I'm struck by their confidence in OPEC's ability to manage the supply side of the market, citing calls to cut production to avert an inventory bubble. It's worth recalling that OPEC's current discipline only dates back to the recovery from the 1998-99 price collapse, which required cooperation from Russia, Mexico and Norway to drag prices back above $10 per barrel. This was preceded by a decade of cheating, reminding us that there will be tremendous incentives for individual OPEC countries to cheat on any future quota reductions, particularly as prices continue to ease and their lofty 2004 revenues shrink.

There's also scant mention of any shift in consumer demand, despite evidence that sales of the largest SUVs are off dramatically, and sales of hybrids are growing as fast as Toyota can churn them out. Granted, it would take years for this to have any appreciable impact on aggregate demand, but it could be an important signal for long-term investors.

Otherwise, most of the big issues and their implications for corporate earnings are well represented in the article, with the exception of climate change. It's well worth a read.