THE EIA Thread pt 2 (merged)

[Frank]

thanks Pup, I'll check these out.

[Aotearoa]

At the risk of sounding like a conspiracy theorist, can I ask if (anyone knows if) it is in EIA's charter to make realistic or even honest forecasts? Having noted the sharp contrast between EIA's forecasts and those of others like ASPO, Energy Watch Group, or the IEA, despite using the same data, I wonder whether they have a different purpose. The acronym is suspiciously similar to IEA, but then also to CIA, the erstwhile employer of its head. The name, Energy Information Administration, should perhaps be interpreted as those who administer energy information, and are selective and deliberate in who knows what.

Perhaps this is only the thinking of a non-US national, but there are plenty of reasons why the US might want to convince others that there is oil aplenty. We are not only unsure of the exact reserves, or resources, of oil-producing countries; they are unsure of each other. If they all had accurate knowledge, they might realise it was time to push up prices, secure in the knowledge that others wouldn't or even couldn't undercut them. The US has nothing to gain from OPEC, Venezuela, Nigeria, or most other oil-exporters charging more for the same oil. At the risk of misrepresenting the true state of affairs to their own populace, and a few allies who could be entrusted with the truth, the US might just have an agency whose task is to convince everyone else that oil prices can stay down for another year, and then one more.

Or is this just paranoia?

[pup55]

Hello, Aotearoam, welcome to PO.com

The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy. Our mission is to provide policy-independent data, forecasts, and analyses to promote sound policy making, efficient markets, and public understanding regarding energy and its interaction with the economy and the environment.

EIA

The Department of Energy Organization Act (Public Law 95-91) allows EIA's processes and products to be independent from review by Executive Branch officials; specifically Section 205(d) says:

"The Administrator shall not be required to obtain the approval of any other officer or employee of the Department in connection with the collection or analysis of any information; nor shall the Administrator be required, prior to publication, to obtain the approval of any other officer or employee of the United States with respect to the substance of any statistical or forecasting technical reports which he has prepared in accordance with law."

Here are some snippets from the EIA's "about eia" page and section about independence. It's supposed to be a non-political actvity. I believe the data gathering function that they do is quite valuable, and gives the public an abundance of data that is useful in making all sorts of business and economic decisions.

However, the notion that this organization is "independent" from the political system in any way is silly, particularly in this administration. One only need look at the justice department, which is also supposed to be independent, for an example of this. Of course, there is no accountability whatsoever, so they can put out what they want to and nothing is going to happen to them.

All of this forecasting is based on a number of fundamental assumptions, such as: the USGS survey is correct, we should believe what OPEC says about their reserves, and a few others, and so it is pretty easy, given these, to arrive at a nice sunny forecast.

The administrators of the EIA are fully aware of the PO theory, but for whatever reason, this has obviously not permeated into its public forecasts. The "official view", as determined by the bosses, cannot deviate too much from the cornucopian viewpoint, particularly in an election year.

So, until the consensus within the EIA changes, we are going to get more forecasts exactly like this one, which shows declining energy costs for the next few years, the ability to consume as much as we want, and all will be well forever.

No amount of confronting them with their old forecasts will do any good, since the accountability is all at the top level, and those people think they are immune to accountability.

It's a pity, really. People use these forecasts to do their capital budgeting and forecasting in businesses, and to have it be that far off is terrible. That is why consultants like CERA and IHS and OPIS have jobs: People no longer trust the government forecasts and want to hire someone better to give them one for real.

So, I think probably it is best to use the data for what it is, and draw whatever conclusions you can, and clearly, and not pay too much attention to the government forecasts.

[DantesPeak]

US Energy Information Administration Chief Guy Caruso at first said that speculators were driving up the price of oil by $10 to $50, but later clarified that by saying they had pushed up prices by $12 a barrel. [How did he know that?]

He also said that the price of oil would be $57 in 2016. Anyone who wants to contract to sell oil at $57 in 2016 can contact me.

US Official: Speculation Fuels Oil Price
16 minutes ago

WASHINGTON (AP) — A top Energy Department official says market speculation may be adding as much as $12 to the price of crude oil and that prices may not yet have peaked.
The head of the federal Energy Information Administration, Guy Caruso, told a Senate hearing that supply and demand would suggest a price of about $90 a barrel. Prices fluctuated around $102 a barrel Tuesday after surging to a record $104 a barrel on Monday.
Caruso told a Senate hearing that market speculation, the decline of the dollar and money moving into commodities have added to the upward pressure on crude oil prices.

AP

EIA's Caruso Suggests Speculators Having Oil-Price Effect

DOW JONES NEWSWIRES
March 4, 2008 11:02 a.m.


By Siobhan Hughes
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The Energy Information Administration's top official on Tuesday said that speculators were having an effect on oil prices, though the effect was difficult to quantify.
"There's clearly been a surge in moneys coming in to commodities markets, including energy, which has had some upward effect on the price above the trendline," EIA Administrator Guy Caruso said in response to a question during a Senate Energy and Natural Resources Committee hearing.
"Something's clearly going on," he said. "It's difficult to say whether that number is $5 or $10," he said, but said he would "strongly disagree" that it is $50.

WSJ

EIA Projects 'Real-World Crude' At $57/Bbl In 2016

DOW JONES NEWSWIRES
March 4, 2008 10:19 a.m.


By Siobhan Hughes
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--The Energy Information Administration on Tuesday projected that the price of so-called "real-world crude" oil would decline to $57 a barrel in 2016 as expanded investment in exploration and development brings new supplies to the market.
Guy Caruso, the administrator of the EIA, provided the estimate in testimony before the Senate Energy and Natural Resources Committee.
He said that the price of natural gas would decline through 2016, also as new supplies enter the market. After 2016, he projects that real natural gas prices would rise to $6.56 per thousand cubic feet in 2030.
He also said that the consumption of biofuels would rise to 29.7 billion gallons in 2030, or about 11.3% of total motor vehicle fuel, following the enactment last year of a law that mandated more ethanol be blended into the fuel supply.

WSJ

[emersonbiggins]

I don't remember whether it was DantesPeak or perhaps Pup55 that mentioned that rampant speculation on crude futures was improbable or impossible , if only because somebody, somewhere must eventually take physical delivery of that crude, and the price they pay is set by the law of supply and demand.

Does anyone recall that conversation?

[DantesPeak]

Futures are a zero sum game. The exchange traded fund for oil, USO as well as others, are based upon futures. Therefore an offsetting short position exists on all exchange traded oil funds.

Speculators could only bid up the price of oil if they took delivery, or in the short term, influenced natural sellers to withhold oil temporarily.

[emersonbiggins]

Thanks for the succinct explanation.

[americandream]

Wasn't the free market meant to be the most efficient model for the allocation of resources? If this particular corner is in effect inefficiently working, what does it say of the entire model?

[Tanada]

Wasn't the free market meant to be the most efficient model for the allocation of resources? If this particular corner is in effect inefficiently working, what does it say of the entire model?

This corner is working efficiently based on economics, it just isn't producing cheap oil that so many free marketeers have assumed would come along.

[americandream]

That's not what Gary the Carrot's saying though, is it, Tanada. He's accusing the oil markets of speculatively bucking up the prices with the retort that there's enough black stuff in the ground. If thats the case, this damn well sounds to me like someones being shafted, namely the not so well-off consumer. In fact, this sounds to me like the impostion of a tax...except its the rich taxing the poor.

Either oil is depleting or there's a con afoot!

When are the media going to do their job in this so-called free society we inhabit and inform us of the facts...so that we may exercise our vote in an INFORMED MANNER!

[Tanada]

Either oil is depleting or there's a con afoot! When are the media going to do their job in this so-called free society we inhabit and inform us of the facts...so that we may exercise our vote in an INFORMED MANNER!

The next time the mass media gives an unvarnished account of ANYTHING would be the first time, especially in the realm of pollitics and voter information.

[Aaron]

When are the media going to do their job in this so-called free society we inhabit and inform us of the facts...so that we may exercise our vote in an INFORMED MANNER!

I kind of resent that... Guy Caruso may be a tool, but we are #1 in the world for "oil news" according to Google.Not OGJ or CNN or ABC News... Peakoil.com. Man that's gotta smart. But I understand what you mean.

[DantesPeak]

I agree with Aaron, and from what I gather, Caruso was just giving his opinion. I'd like to see someone come up with some kind of proof that speculators drive up oil prices the next time they go before Congress.

As I have said before, for all we know, speculators could be driving down prices. Pickens admitted to being short the market recently. Think back at the beginning of 2007, with the oil price down, when it seemed most everyone on Wall Street expected lower prices.

Caruso expects oil priced at $104 to bring on new supplies. Didn't we hear that as it past $40, $50, $70, and $90?

Anyway, the damage is done - but Caruso does expect higher prices in 2030:

ENERGY UPDATE: Oil Prices May Drop In Near Term, Then Soar Again

The Energy Information Administration (EIA) gave Congress today, March 4, a mixed outlook for oil prices, saying they may drop in the next few years then rise again possibly as high as $185 a barrel. Appearing before the Senate Energy and Natural Resources Committee, EIA Administrator Guy Caruso presented an updated energy outlook since Congress approved an energy bill in December that included new fuel efficiency standards for light vehicles and energy efficiency standards for appliances.

For the short term, Caruso said the updated analysis shows that real world crude oil prices would decline from current levels to $57 a barrel, in 2006 dollars, by 2016 or about $68 in nominal or actual dollars. Caruso said the current high prices – nudging up to a record price near $104 a barrel Monday -- would produce expanded investment in exploration and development, bringing new supplies to the market in the short run.

After 2016, however, the average real price of crude oil would go to $70 a barrel in constant 2006 dollars or about $113 a barrel in actual dollars by 2030, according to the outlook. Caruso said his agency recognizes the uncertainties in the energy markets in the long run and therefore projected a "high price case" where oil prices could soar to $185 a barrel in actual dollars. His overall report to the committee was welcomed by Senate Energy and Natural Resources Chairman Jeff Bingaman (D-New Mexico) and ranking member Pete Domenici (R-New Mexico) who both gleaned good news from it.

Senator Byron Dorgan (North Dakota) said, "I think there's some good news in this report" but added no one knows what will happen in 24 months, let alone 24 years. He also blamed market speculators for driving up oil prices, a point Caruso acknowledged as a factor that perhaps was adding "some upward pressure" on prices.

Rotor.com

[shortonoil]

Aaron said:

Guy Caruso may be a tool, but we are #1 in the world for "oil news" according to Google.Not OGJ or CNN or ABC News... Peakoil.com

Well .... when you put it that way ......... maybe we are important! Thanks Aaron, from all of us.

DantesPeak said:

Caruso expects oil priced at $104 to bring on new supplies. Didn't we hear that as it past $40, $50, $70, and $90?

It is amazing that anyone would still listen to this same old absurdity. It just shows how uninformed the general public is about PO, or just about oil in general. That is our biggest hurdle in getting the message out there; without a doubt!

[FreddyH]

Caruso expects oil priced at $104 to bring on new supplies. Didn't we hear that as it past $40, $50, $70, and $90?

The last time a barrel of oil sold for $40 was in Sept 2004. In that quarter, flow was only 83.3-mbd. Sept 2004 was also the month that Colin Campbell made his bold forecast that All Liquids would peak in 2006 at 84-mbd. Today it is 87-mbd.

All Liquids is tracking the growth trend forecast by most geologists and analysts.

The spec spikes are getting higher and broader as more parties join this playground:

Image too big- jato

barrel meter link

[Aaron]

Aaron said:

Guy Caruso may be a tool, but we are #1 in the world for "oil news" according to Google.Not OGJ or CNN or ABC News... Peakoil.com

Well .... when you put it that way ......... maybe we are important!

Thanks Aaron, from all of us.

DantesPeak said:

Caruso expects oil priced at $104 to bring on new supplies. Didn't we hear that as it past $40, $50, $70, and $90?

It is amazing that anyone would still listen to this same old absurdity. It just shows how uninformed the general public is about PO, or just about oil in general. That is our biggest hurdle in getting the message out there; without a doubt!

It is most certainly been my pleasure.

You're welcome.

[pup55]

somebody, somewhere must eventually take physical delivery of that crude

I hope I didn't tell you this, because it is of course not right at all. Anybody can write a contract for delivery of some quantity of crude oil at some time in the future, whether they have the crude or not.

I, some jerk sitting in some office, can sell 1000 barrels of crude oil right now, if I want. Some other jerk elsewhere can buy some if he or she wants.

As long as I buy some back before the contract expires, I don't have to mess with it. That's why there is such a flurry of activity at the end of the month when the current contract expires.

I am taking a hell of a risk, of course. If I sell some November crude oil right now, the closer it gets to November, the more nervous I will be. I will be willing to pay whatever to get this offsetting contract.

What I would be speculating is that I can buy this contract back between now and November at something less than what I sold it for in the first place. If I can't, I lose. I will be pretty frantic on October 22, when the November contract expires, if I have not done something with this by then.

Each contract is 1000 barrels, so there are many many more contracts outstanding at a given time than there is actual physical oil.

The current (noon EDT) volume on April Crude Oil is 225,000 contracts, which represents 219,000,000 barrels of oil, and we are only talking about a half a day, and only one grade of oil, WTI. This does not inclue the "open interest" which is the number of contracts sitting around in some account somewhere. Right now, it's 333,000,000 barrels for April.

[emersonbiggins]

Thanks for the info, Pup55. I probably (completely?) misunderstood the concept at first, but your explanation makes a lot of sense.

[DantesPeak]

Methinks Caruso has become somewhat delusional about the US energy outlook, but this is what he said yesterday:

March 4, 2008

Annual Energy Outlook
TESTIMONY

March 04, 2008

GUY CARUSO

ADMINISTRATOR U.S. DEPARTMENT OF ENERGY

SENATE ENERGY AND NATURAL RESOURCES

ANNUAL ENERGY OUTLOOK

Energy Prices

EIA has raised the reference case path for world oil prices in AEO2008, although the upward adjustment is smaller than the last major adjustment, introduced in AEO2006. In the AEO2008 reference case, real world crude oil prices (defined as the price of light, low-sulfur crude oil delivered in Cushing, Oklahoma, in 2006 dollars) decline gradually from current levels to $57 per barrel in 2016 ($68 per barrel in nominal dollars), as expanded investment in exploration and development brings new supplies to the world market. After 2016, real prices begin to rise (Figures 1 and 2), as demand continues to grow and higher cost supplies are brought to market. In 2030, the average real price of crude oil is $70 per barrel in 2006 dollars, or about $113 per barrel in nominal dollars. In developing its oil price outlook, EIA explicitly considered four factors: (1) growth in world liquids consumption, (2) the outlook for conventional oil production in countries outside the Organization of the Petroleum Exporting Countries (OPEC), (3) growth in unconventional liquids production, and (4) OPEC behavior. With the forces driving demand outside the United States as strong or stronger than previously expected and with global supply projections somewhat weaker, trends in total world liquids production are similar to those in the Annual Energy Outlook 2007 (AEO2007) reference case but the oil prices are higher.



Energy Production and Imports

Liquids and Other Petroleum Products. U.S. crude oil production grows from 5.1 million barrels per day in 2006 to a peak of 6.3 million barrels per day in 2018, primarily due to increased production from the deep waters of the Gulf of Mexico and from the expansion of enhanced oil recovery operations in onshore areas supported by higher crude oil prices. Domestic production subsequently declines to 5.6 million barrels per day in 2030, as increased production from new smaller discoveries is inadequate to offset the declines in large fields in Alaska and the Gulf of Mexico (Figure Total domestic liquids supply, including crude oil, natural gas plant liquids, refinery processing gains, and other refinery inputs (e.g., ethanol, biodiesel, BTL, and liquids from coal) grows from 8.3 million barrels per day in 2006 to 10.5 million barrels per day in 2030. The net import share of total liquids supplied, including crude oil and refined products, drops from 60 percent in 2006 to less than 51 percent in 2022, and then increases to 54 percent in 2030 as crude oil imports grow rapidly at the end of the projection to meet liquids demand (Figure 9). Net crude oil imports in 2030 are 11.1 million barrels per day in 2030 and net product imports (including net ethanol imports) are 1.3 million barrels per day in 2030.

[Congressional Transcript – no link]

[Tyler_JC]

So much for Peak Oil in 2005...

Oil production keeps rising but spare capacity is shrinking.

I can understand why the contracts for 2010 would be expensive, I don't really understand why the April 2008 contract should be so expensive. The market fundamentals (supply growth, demand growth, inventories, etc.) don't seem to justify it.