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