The energy model used by the Energy Information Administration (EIA) is quite popular. The model's resulting forecast of energy prices, supply and demand is routinely used by Congress, investors, equity analysts, E&P firms, companies planning new facilities and regulators who approve those facilities, and by industries deciding how to hedge fuel prices. Other countries use EIA forecasts as a benchmark as well-including Canada's National Energy Board, Israel's energy analysts and even OPEC's research scholars. But that could be a problem, says a new study by two professors at Penn State University. Price and supply projections issued by the EIA have consistently turned out to be overly optimistic, say Frank Clemente, senior professor of social science and energy policy; and Timothy J. Considine, professor of natural resource economics. "It is widely recognized that EIA forecasts for oil and natural gas differ significantly from actual outcomes," the professors report. For more on this, see the November issue of Oil and Gas Investor. For a subscription, call 713-260-6441.
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