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Short-Term Energy Outlook Model Documentation: Regional Residential Propane Price Model

November 9, 2009

Overview of the Short-Term Propane Model

The regional residential propane price module of the Short-Term Energy Outlook (STEO) model is designed to provide residential retail price forecasts for the 4 census regions: Northeast, South, Midwest, and West.

The STEO model contains over 2,300 equations, of which about 450 are estimated regression equations. The regional residential propane price module, which is documented in this report, contains 31 equations, of which 14 are estimated. Some input variables to the STEO model are exogenous, coming from other forecasting models in EIA or forecasts produced by other organizations (e.g., weather forecasts from the National Oceanic and Atmospheric Administration). The frequency of the STEO model is monthly and the model equations are used to produce monthly forecasts over a 13-to- 24 month horizon (every January the STEO forecast is extended through December of the following year).

Regional residential propane prices are estimated as a function of the propane wholesale price to the petrochemical sector, regional stocks, and weather. Regional residential propane prices are aggregated to the U.S. level by weighting regional prices by estimated regional consumption shares.

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