Analysis & Projections

Working Paper Series

Views not necessarily those of the U. S. Energy Information Administration. Staff papers presented here are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurence by the U. S. Energy Information Administration. References in publications (other than acknowledgment) should be cleared with the author(s) to protect the tentative character of these papers.

Papers by topic

Ethanol | Finance | Industrial | International | Macroeconomic | Petroleum  |  Wells and Drilling


WELLS AND DRILLING

Improving Well Productivity Based Modeling with the Incorporation of Geologic Dependicies
The U.S. Energy Information Administration (EIA) utilizes supply-side modeling of well-level performance measures quantified at the county level for resource plays. Well performance, however, does not depend upon political boundaries. Aligning well-productivity with underlying geologic dependencies will improve production projections by better quantifying the area, and the well-performance in that area, of potential future development.

The choice of geologic dependencies can be as flexible and numerous as time and resources permit, or a derivative product of multiple dependencies. The summation of the well-performance and area is also a reasonable method to estimate an amount of resource that might be recoverable under a given set of technological and economic conditions.

released: October 14, 2014; contact author(s): Troy Cook and Dana Van Wagener

 


Quantifying Drilling Efficiency
This paper examines the methods used to measure drilling efficiency and the difficulties encountered when using various data sources. The analysis exames the technologies used before, during, and after rotary rig iperation which shape overall productivity results.

released: August 13, 2010; author(s): John Cochener

 

INDUSTRIAL

Natural Gas and U.S. Industrial Production: A Closer Look at Four Industries
We consider the relationship between natural gas prices and production in the U.S. resins, agricultural chemicals, cement, and aluminium industries. Overall, our analysis using various tests and regressions does not allow for generalizations about the association between natural gas prices and production across these four energy-intensive industries. Rather, the relationships between natural gas and production appear to be driven by the particular institutional details of each industry.

released: August 30, 2014; contact author(s): Vipin Arora and Elizabeth Sendich
 

The Importance of Natural Gas in the Industrial Sector With a Focus on Energy-Intensive Industries
The industrial sector, which is comprised of manufacturing, construction, agriculture, and mining industries, is one of the largest consumers of natural gas (NG), and increased energy production is known to result in more economic activity broadly. The industrial sector consumes approximately one-third of total U.S. dry natural gas and natural gas liquids as feedstock, and it may be an important beneficiary of an expansion in oil and gas resources. Studies show that some expected links between aggregate industrial production, energy, and economic indicators may not be as clear as once thought. This work aims to build on previous work using statistical tools to determine if simple, long-term relationships between NG price and supply and industrial production exist and have ever changed or are currently changing to determine if past data can inform estimations of future trends.

released: February 28, 2014; contact author(s): Elizabeth Sendich
 

FINANCE


The Information Role of Spot Prices and Inventories
Using a rational expectations approach, we show why and how differences in beliefs, as well as the volume of speculative futures trading, may vary across commodities and through time. We demonstrate that equilibrium differences in beliefs are determined by characteristics of the underlying commodity, including storage costs, the amplitude of shocks, the accuracy of information available to informed investors, the numbers of informed and uninformed traders, and the elasticity of demand and supply. We also demonstrate that passive investors magnify equilibrium differences in beliefs and expand the scope for financial speculation--even though they do not themselves speculate. Finally, we argue that fundamental determinants of speculative futures trading may have been misinterpreted by some as "excessive" speculation in the energy markets in recent years.


released: June 24, 2014; contact author(s): Thomas Lee
 


Are there Gains from Pooling Real-Time Oil Price Forecasts?
The answer depends on the objective. The approach of combining five of the leading forecasting models with equal weights dominates the strategy of selecting one model and using it for all horizons up to two years. Even more accurate forecasts, however, are obtained when allowing the forecast combinations to vary across forecast horizons. While the latter approach is not always more accurate than selecting the single most accurate forecasting model by horizon, its accuracy can be shown to be much more stable over time. The MSPE of real-time pooled forecasts is between 3% and 29% lower than that of the no-change forecast and its directional accuracy as high as 73%. Our results are robust to alternative oil price measures and apply to monthly as well as quarterly forecasts. We illustrate how forecast pooling may be used to produce real-time forecasts of the real and the nominal price of oil in a format consistent with that employed by the U.S. Energy Information Administration in releasing its short-term oil price forecasts and we compare these forecasts during key historical episodes.

released: February 14, 2014; contact author(s): Thomas Lee
 

Contango in Cushing? Evidence on Financial-Physical Interactions in the U.S. Crude Oil Market
While there has been considerable focus, especially in the aftermath of the 2007-08 oil price spike, on the role of financial speculators in influencing oil prices, a question that lies at the heart of this debate -- how oil futures trading is related to spot oil prices — remains unresolved. A financial speculator who expects future oil prices to rise and wants to take a speculative position based on this expectation would typically go long in financial futures contracts. An index investor who wants to invest in oil will take a similar long position in futures contracts, which would be rolled over periodically. If such speculative or investment activity increases the futures price sufficiently relative to the prevailing spot price, a rational market response would be for arbitrageurs to step in to buy oil in the spot market and store it while simultaneously selling futures.

released: March 23, 2012; contact author(s): Thomas Lee
 

Implications of Changing Correlations Between WTI and Other Commodities, Asset Classes, and Implied Volatility
Crude oil price movements are constantly changing as the market reacts to new information regarding current production, consumption and inventory levels of crude oil and petroleum products. Oil prices are also affected by changes in the market’s expectations of the future supply and demand balance. Depending on market conditions and sentiment, different time periods can have news and events related to either supply or demand issues as the dominant factors dictating price movements. The analysis presented here attempts to identify time periods when crude oil prices are responding more to either supply or demand, relative to the other, by examining the magnitude and sign of the correlation of crude oil prices against other commodities and asset classes.

released: March 23, 2012; contact author(s): James Preciado
 

Factors Influencing Oil Prices: A Survey of the Current State of Knowledge in the Context of the 2007-08 Oil Price Volatility
The current state of knowledge on the important factors influencing oil prices have been identified in relevant venues, including recent academic literature, government reports, policy debate, and industry analysis. In this paper, we briefly survey the current state of knowledge on this topic, based on an objective assessment of each factor’s influence and potential to influence ongoing policy debates, or academic or industry research. In sections 2 to 6, we provide a summary of what current research tells us, and with what degree of confidence, about the identified factors, their interactions, and influences on prices. We draw on nearly 200 research papers, articles, and industry and policy documents, mostly work published in the past five years. Section 7 concludes.

released: August 30, 2011; contact author(s): Thomas Lee
 

INTERNATIONAL


Global Natural Gas Overview: A Report Prepared by Leidos, Inc., Under Contract to EIA
The attached report, prepared by Leidos, Inc., under contract to EIA, provides a broad overview of today's global natural gas markets, possible drivers of the evolution of the global gas market, and a high level overview of select economic theories that may be applied to describe basic market interactions in current and future global natural gas markets.
released: August 26, 2014; contact author(s): Angelina LaRose
 

MACROECONOMIC

Alternative Measures of Welfare in Macroeconomic Models
The impacts and costs and benefits of different policies and scenarios can be calculated in several different ways. The measure chosen often depends on the class of model employed and the purposes of the policy and/or study. The sum total of costs and benefits, or changes in costs and benefits, is termed welfare. Traditionally, EIA has used measures such as GDP, consumption, and unemployment (among others) as ways to describe the overall economic impacts of policies, mainly highlighting changes in consumption as a proxy for welfare. Using a variety of different measures of welfare to evaluate policy changes is desirable. This is particularly true in the case of utility, which is unique because it can incorporate the direct and indirect costs and benefits of different policies. Given the assumptions and complications required to make welfare calculations using the current NEMS setup, using a CGE model to make such calculations is a good option.

released: December 11, 2013; contact author(s): Vipin Arora
 

An Evaluation of Macroeconomic Models for use at EIA
EIA has traditionally used macroeconomic models to produce forecasts and to evaluate the impact of different government policies. This document reviews the current EIA approach and alternatives from a methodological perspective. It begins with a short summary of different macroeconomic models and their strengths and weaknesses when used for policy analysis and in producing forecasts. This is followed by recommendations for possible use at EIA based on the capabilities of each model type. The mechanics of each specific macroeconomic model are reviewed next, along with additional details on policy analysis and forecasting.  The final section is a technical appendix with the relevant mathematical detail on each model.

released: December 16, 2013; contact author(s): Vipin Arora
 

ETHANOL

Issues and Methods for Estimating the Share of Ethanol in the Motor Gasoline Supply
This paper describes publicly available fuel ethanol data and suggests methodologies to estimate the percentage of ethanol used in the United States gasoline supply. These methods, which use historical U.S. Energy Information Administration (EIA) survey data and information from other sources, involve calculations based on motor gasoline and ethanol production, net imports, and inputs into refineries and blenders.

released: October 13, 2011; contact author(s): Tony Radich  and Sean Hill


 

PETROLEUM

Incorporating International Petroleum Reserves and Resource Estimates into Projections of Production
This paper describes EIA's petroleum reserves and resource assessment methodology, comparable long-term outlooks' approaches to resource uncertainties, production decline rates, resource terminology, and the available estimates.

released: June 7, 2011; contact author(s): John Staub

 

Projecting the scale of the pipeline network for CO,2-EOR and its implications for CCS infrastructure development
This paper looks at the required infrastructure construction to support NEMS projections of CO2 use for oil recovery.  It considers the scale of the infrastructure and potential implications for adaptation of it for CO2 transport for CCS.

released: October 25, 2010 | author(s): Matthew Tanner

 

The Challenge of Achieving California's Low Carbon Fuel Standard
Paper looks at California’s Low Carbon Fuel Standard (LCFS) reductions in the carbon intensities (CIs) of both gasoline and diesel transportation fuel types and compliance scenarios envisioned by CARB to meet the LCFS schedule.

released: May 24, 2010; revised July 16, 2010; contact author(s): Peter Gross