Next year is going to be a biggie for the world's economies and markets.
The Organization of Petroleum Exporting Countries is in disarray and could lose all control of oil pricing in 2016. Britain will likely decide whether to wave goodbye to the European Union or stay put, and the Bank of England will mull a Federal Reserve-style interest-rate hike. China, which is polishing up a new five-year economic plan, could rattle the commodities markets yet again by posting lower-than-expected growth figures, or put commodities on the path to recovery with a growth rebound.
Trade could boom with the approval of the new Trans-Pacific Partnership but trade within the EU and the euro-zone countries that dominate it could come under strain if the Schengen passport-free zone comes entirely unglued because of the refugee crisis.
With the caveat from the great Yogi Berra – "It's tough to make predictions, especially about the future" – herewith are mine. When I review my predictions at the end of 2016, I hope at least to have been directionally right.
Oil, oil everywhere
On Dec. 21, Brent crude, the international benchmark, fell to an 11-year low of just over $36 (U.S.) a barrel, an unimaginable price a year ago. Only a year and a half ago, oil was at $110 and the bullish "stronger-for-longer" view was largely intact.
My bet is that oil will end the year at about the same price, although it could dip into the $20s before bouncing back. That's because supply continues to outpace demand and supply has proven remarkably resilient to the price plunge.
OPEC, led by Saudi Arabia, has adopted an each-man-for-himself pumping policy in a bid to steal back market share from non-OPEC countries, notably the shale-mad United States and the ever-expanding Canadian oil sands.
Shale production is bound to fall somewhat in 2016 because financing will dry up, but any shortfall there will be more than made up by Iran; It could pump another 800,000 barrels a day as the U.S.-led sanctions ease off.
Meanwhile, oil in storage has climbed substantially, reaching three billion barrels. That's a big overhang and could keep prices soggy for a long time, even if demand rises.
The good news for oil companies is that the ingredients for a price pop are being set even as prices decline.
International Energy Agency boss Fatih Birol says capital spending by oil companies fell 20 per cent in 2015 and will fall by the same amount in 2016, an unprecedented back-to-back plunge.
Supplies will tighten, inevitably boosting prices. But whether that will happen in one year or five is anyone's guess.
Forget Grexit, it's all about Brexit
British Prime Minister David Cameron has hinted that the In-Out referendum on Britain's European Union membership will be held by the summer. The vote will be tight but my guess is that the pro-EU forces will emerge on top.
Britain's potential exit – or Brexit – is a hard beast to analyze because the EU means so many things to so many people.
The anti-immigrant crowd will turn it into an immigration vote. They will argue that no EU country can fully control its borders as long as it's an EU member and the logic is hard to dispute.
The anti-EU crowd will argue that leaving will save a lot of money without compromising Britain's trade or investment flows with the EU or London's status as the continent's premier trading centre. They note that Norway and Switzerland are not EU members and their economies have always galloped ahead.
The pro-EU crowd, however, will argue that Britain's fortunes could suffer greatly under Brexit and they are right.
Norway and Switzerland are not good examples to cite by the Out side because the two countries were never EU members. Britain is a member and its withdrawal from the EU would be treated by Germany, France, Italy and Spain as a divorce, potentially a bitter one.
As economics writer Anatole Kaletsky noted, the smallest EU countries might treat Britain with outright hostility because Britain's withdrawal would leave Germany as the region's undisputed power.
Britain would have to renegotiate trade and investment access to the EU. British companies might have to set up EU subsidiaries to guarantee sales in those countries.
Worst of all, for Britain, London could lose its status at the euro trading centre. You can bet the French and the Germans would find devious ways to move that trading to Paris or Frankfurt.
Once the message sinks in that Brexit will jeopardize Britain's wealth and trading clout, the pro-EU forces will win.
Commodities, weaker for longer
Putting aside oil, where are commodities such as copper, nickel, zinc, iron ore, aluminum and coal going? Probably down, given the enormous investment into new mines and smelters made during the glorious "stronger-for-longer" years. Many of those projects are just now coming into production and they can't be turned off.
My favourite sentiment barometer is Mick Davis, the former chief executive officer of Xstrata, the mining giant that bought Canada's Falconbridge and later merged with Glencore, the world's largest commodities trader. He's now the boss of X2 Resources, a private-equity-funded mining wannabe in London that is backed by Canadian pension funds.
He has a keen eye for value and, since leaving Xstrata two years ago, he hasn't made his move. When he does, that'll be a strong signal that the bottom has been reached.
Greece, the pain continues
Poor Greece. It dominated the euro zone crisis headlines since 2010, when it received the first of its three bailouts, and now nothing. What a blow to the ego – Greece has been pushed off the front pages by new crises of the terrorism and refugee variety.
But that doesn't mean that Greece is not suffering; it is. It's back in recession while it tries to implement new austerity measures that came with a summer bailout, the one Germany came close to not approving. Some economists think it's just a matter of time before it's gone from the euro zone.
My sense is that the worst is now truly over, that Greece will stay in the euro zone and that (weak) growth will return next year.
The skeptics forget that Greece's debt, while enormous on paper, at 180 per cent of gross domestic product, is smaller than advertised. Since the debt maturities on Greek debt have been extended, and the interest rate cut, debt payments relative to GDP are tiny and will stay so until at least 2023. Plus Greece's international creditors, led by the European Union, are likely to reward the Greek government for more or less obeying bailout orders by cutting the country some slack on the austerity measures.
Greece isn't saved, but the doomsday talk is no longer warranted.
Eric Reguly