At the November 1, 1995, meeting of the Natural Gas Roundtable in Washington, DC, a representative of the American Gas Association (A.G.A.) launched a blistering attack against the Energy Information Agency (EIA) for its forecasts of natural gas prices. In essence, A.G.A. complains that EIA's long-term forecasts have proven unreasonably high, softening enthusiam for gas-burning equipment (from turbines to gas water heaters).
As quoted by Gas Daily, A.G.A.'s representative said: "The bottom line is whose numbers are right. If you can't get it right, then get out of the forecasting business. . . . We have not tried to make this a political issue. . . . but . . . we care about our tax dollars being used to lose us business."
Before laying this mantle of responsibility on EIA, A.G.A. might want to consider a couple things. First, if A.G.A. is concerned about public money going to support inaccurate forecasts, it might also take aim at the Gas Research Institute (GRI), which exhibits a even higher level of forecast inaccuracy (see chart). And GRI is directly funded by customer surcharges. Second, A.G.A. should consider whether its own members should fund forecasts that aren't any better than those put out by private forecasters, such as the WEFA Group or DRI.
And don't overestimate the impact of any single forecast. Most users of long-term price forecasts examine multiple sources (em such as prices quoted for a long-term supply contract by a gas marketer, or a consensus forecast calculation that includes data points from many different forecasting agencies. After all, EIA supplies its clients with a survey of forecasts from other major forecast houses, including A.G.A.'s. t
David A. Foti is a senior consultant for Arthur Andersen's energy consulting practice in Houston, TX. A. Clay Denton is a manager of operations analysis for Hadson Gas Services, Inc. in Dallas, TX.
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