U.S. Department of Energy Outlook Ignores Major Developments

The Department of Energy's Annual Energy Outlook doesn't contain much useful information for predicting oil and gas prices.

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Gregg Laskoski is a senior petroleum analyst for GasBuddy.com

When people who follow the oil industry try to look ahead, most of us, I think it's safe to say, do so with vision that is often predicated on (and perhaps impaired) by powerful assumptions. Commentary on where oil and gasoline prices may be going is easy to find, but what's difficult is finding credibility that emerges from conviction and that can only materialize when we have proof that our assumptions are correct.  

Last month the U.S. Department of Energy's Energy Information Administration published its Annual Energy Outlook with projections to 2035. According to the Department of Energy:

The projections in the U.S. Energy Information Administration's (EIA's) Annual Energy Outlook 2012 ( AEO2012) focus on the factors that shape the U.S. energy system over the long term. Under the assumption that current laws and regulations remain unchanged throughout the projections, the AEO2012 document provides the basis for examination and discussion of energy production, consumption, technology, and market trends and the direction they may take in the future. It also serves as a starting point for analysis of potential changes in energy policies.

[ See a collection of political cartoons on gas prices.]

Oddly enough, that may be troubling to people looking for the government's definitive perspective on energy. You won't find it here. The document explores 29 assumptions, and one might think that should pretty much cover what's necessary. But while it touches on oil price and production trends, the impact of Comparative Average Fuel Economy standards (known as CAFE) and the changing structure of the refining industry, for instance, it seems to contain its assumptions in a vacuum. 

It does not weigh OPEC's influence on the United States, or account for growing imports from non-OPEC nations either. Perhaps it's not designed to speculate on the impact of China's massive investment in Canadian oil and what that might mean to the United States. But if that is the case, why entertain some lesser assumptions while ignoring major developments?