Underestimating U.S. Energy Demand? A Review of EIA Performance - Feature - December 5, 2008

Dec 5, 2008

Underestimating U.S. Energy Demand?
A Review of EIA Performance
December 5, 2008

Carolyn Fischer
Carolyn Fischer
RFF Senior Fellow

Richard Morgenstern
RFF Senior Fellow

Each year since 1982, the U.S. Energy Information Administration (EIA) has forecast demand for energy usage – a process made difficult by vagaries in weather, the overall economy, price and supply fluctuations, and other uncertainties. The projections are valuable to state and federal officials as well as oil and gas producers and electricity providers as they plan future operations.

In a paper entitled “Understanding Errors in EIA Projections of Energy Demand,” RFF Senior Fellows Carolyn Fischer and Richard Morgenstern and Research Assistant Evan Herrnstadt examine the accuracy of EIA forecasts over a 22-year period. Their analysis finds “a fairly persistent tendency to underestimate total energy demand by an average of 2 percent per year over the one- to five-year horizon.”


 DP 07-54
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The authors note that since 1994 the projections in the Annual Energy Outlook published by EIA have been based on the National Energy Modeling System, an econometric model. They conjecture that there are undetected biases in the models used to project energy demand, particularly for electric utility renewables, electric utility natural gas, residential electricity, and transportation fuels.

“The EIA is a respected statistical agency with a well-deserved reputation for professional competence, political independence, and transparency,” they authors write. “It is our expectation that findings of the type developed here will themselves be subject to evaluation and, if sustained, will serve as a valuable input to the EIA’s ongoing efforts to revise and improve its modeling capabilities.”