Annual Energy Outlook 2006 from the US Energy Information Agency

Annual Energy Outlook 2006 from the US Energy Information Agency is available at http://www.eia.doe.gov/oiaf/aeo/index.html. I make a lot of use of the annual reports, but I recognize that the future projections are very iffy. The report authors understand their limitations as seers and caution report readers to evaluate the scenarios presented with a good understanding of the assumptions used in the models. Here is one of the key parts of the cautionary language:

The projections in the Annual Energy Outlook 2006 are
not statements of what will happen but of what might happen, given the assumptions and methodologies used. The projections are business-as-usual trend estimates, given known technology, technological and demographic trends, and current laws and regulations (emphasis added). Thus, they provide a policy-neutral reference case that can be used to analyze policy initiatives. EIA does not propose, advocate, or speculate on future legislative and regulatory changes. All laws are assumed to remain as currently enacted; however, the impacts of emerging regulatory changes, when defined, are reflected.

Because energy markets are complex, models are simplified representations of energy production and consumption, regulations, and producer and consumer behavior. Projections are highly dependent on the data, methodologies, model structures, and assumptions used in their development. Behavioral characteristics are indicative of real-world tendencies rather than representations of specific outcomes.

Energy market projections are subject to much uncertainty. Many of the events that shape energy markets are random and cannot be anticipated, including severe weather, political disruptions, strikes, and technological breakthroughs. In addition, future developments in technologies, demographics, and resources cannot be foreseen with certainty. Many key uncertainties in the AEO2006 projections are addressed through alternative cases.

EIA has endeavored to make these projections as objective, reliable, and useful as possible; however, they should serve as an adjunct to, not a substitute for, a complete and focused analysis of public policy initiatives.

The reason that I point this out is that there is a lot happening in the energy industry that cannot be used in the EIA reports because it has not yet been officially announced. With an industry that is as large as the global energy business, it takes a while for a new momentum to become strong enough to make a visible difference in direction.

However, it is possible to take a look back over the industry history and recognize that a prediction of business-as-usual is one of the least accurate predictions that can be made over a 25 year period.