Exploring Hydrocarbon Depletion
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Page added on December 24, 2012
For instance, EIA, by its own admission, states that they had
overestimated crude oil production 62% of the time; they had
overestimated natural gas production 70.8% of the time; and they had
overestimated natural gas consumption 69.6% of the time. Not the best
track record by anyone’s estimation except perhaps EIA’s.
It is also noteworthy that EIA had overestimated the energy intensity
ratio a whopping 96.5% of the time. This is a ratio of total energy
consumption and GDP. They tended to overestimate energy consumption and
underestimate growth in GDP.
In short, EIA is not very good at forecasting.*But what is even more
interesting is that Dr. Montgomery, the lead author of this new study,
was once in charge of models and forecasts at EIA*. Both NERA and
Deloitte used EIA forecasts as the basis of their report models.
Deloitte even stated that they considered EIA’s forecasts to be too
conservative in spite of the fact that EIA has not projected natural gas
demand accurately 70% of the time.
As any student of economics soon learns, economic models are only as
good as their inputs. In fact, it is neither difficult nor unusual for
models to be designed to favor one outcome over another. In other words,
models can be essentially reverse engineered. This is especially true
when the models have been commissioned by industries that stand to gain
significantly in monetary terms. Or government agencies which are
perhaps pushing a political agenda.