EIA's monthly and annual predictions have only one purpose: to prevent the mainstream media from alerting the driving public to the fragility of the domestic energy picture.

Humbugs Along the Potomac

Michael Vickerman | RENEW Wisconsin

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"Oh, no, my dear …  I am a very good man
I'm just a very bad wizard"
--The Wizard of Oz

Humbugs Along the Potomac

by Michael Vickerman, RENEW Wisconsin

In its latest staged display of bureaucratic omniscience, the Energy Information Administration (EIA) said last week that retail gasoline prices across the nation, which have jumped 25% since January, will peak at $2.87 a gallon next month and then recede before the vacation driving season begins in June. The average price motorists will see this summer will be $2.81, a bit less than what they paid in the previous two summers. EIA's current forecast comes one month after its previous prediction that gasoline prices would level off this spring at $2.67 a gallon.

The agency's sunny blandishments may cause a few eyebrows to be raised among the millions of West Coast motorists already paying more than $3.00 a gallon at the pump. Then again, maybe not. With a track record for erroneous forecasting that verges on the spectacular, why should anyone bother to listen to EIA when more reliable predictions can be found on the daily astrology page? 

When agency statisticians issue prediction like these, they are going well beyond the cut-and-dried world of extraction volumes, refinery outputs, fuel imports, and implied demand for refined products. Embedded in EIA's monthly prognostications are assumptions regarding, for example, hurricane activity, geopolitical tensions, the structural integrity of key pipelines, and the veracity of OPEC's communiqués. And every month these statisticians peer into the future and conclude, perhaps with the aid of tarot cards and/or tea leaves, that nothing that could go wrong will go wrong.

According to EIA's oracles, hurricanes will not menace the Gulf of Mexico this year, despite the strengthening La Niña, nor will violence and warfare erupt anew in the Mideast. What about ongoing refinery shutdowns, one might ask? Bad luck, the agency would say. Deteriorating security conditions in Nigeria? A temporary phenomenon. China's escalating demand for energy? OPEC can handle it.

One might think it prudent to factor in a risk premium to account for the likelihood that events beyond our control will disrupt the flow of fuels and drive prices higher. But in the Panglossian cocoon that EIA inhabits, Murphy's Law doesn't exist.

Had last week's divinations come out of the mouth of, say, Carnac the Magnificent, the audience would have snickered at its sheer preposterousness while steeling themselves for the withering desert-themed curse that was sure to come. But when it's EIA and not Johnny Carson that's masquerading as a swami, there's no Ed McMahon on hand on to cue the laughter. Instead, the agency lined up a spokesman from the American Automobile Association to lend instant credibility to its forecast.

"We think the forecast is about on track," said AAA spokesman Geoff Sundstrom. That bit of stage management was enough to transform yet one more ridiculously off-the-wall prediction into an Associated Press article reprinted in numerous metropolitan dailies under headlines like "Gas prices may be cheaper this summer." While the article dinged EIA for underestimating this year's price increase, it failed to balance the presentation with a contrarian perspective challenging the government's reassurances.

But not everyone at EIA is swallowing the agency's Kool-Aid with the requisite gusto. In a bow to reality, EIA Chief Guy Caruso openly frets over gasoline inventories, which are unusually low considering the proximity of the summer driving season.

"The volume of imports is lower than we thought," Caruso said to a Dow Jones reporter.

What disturbs Caruso is the recent decline in the volume of gasoline imports, coupled with an unexpected series of refinery shutdowns both home and abroad. Refiners are struggling to keep up with accelerated demand at the same time the world's petroleum supply is gradually becoming heavier and more laden with impurities like sulfur. Some U.S. refineries cannot process lower-grade crude at all, which leaves the country increasingly dependent on gasoline imports.

Moreover, EIA estimates that U.S. gasoline demand is 2% to 3% percent higher than it was a year ago, and shows no sign of tailing off. With that, the illogic of EIA's outlook becomes transparent. How can inventories rise when demand is running higher than available supply? Why would gasoline prices drop under those circumstances? And, why would overseas refiners step up exports of gasoline to the United States if lower prices are baked into the equation?   

EIA's monthly and annual predictions have only one purpose: to prevent the mainstream media from alerting the driving public to the fragility of the domestic energy picture. And to that end last week's stunt succeeded, despite Mr. Caruso's worries. The vast majority of reporters and editors clearly lack both the technical expertise and the inclination to challenge these official reassurances on energy. In the absence of a full-blown crisis, the humbugs behind the curtain will continue to use the power of illusion to stop us from learning the truth about the energy squeeze that's upon us.


EIA Chief: Concerned about low gasoline imports," Peak Oil Daily. April 16, 2007. http://aspo-usa.com/

Gas prices may be cheaper this summer," F. Josef Hebert, Associated Press, April 11, 2007.

Petroleum and Natural Gas Watch, Vol. 6, Number 6

Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the supply‑demand equation for these fossil fuels, and analyzing its effects on prices, consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit "The End of Cheap Oil" section in RENEW Wisconsin's web site:  www.renewwisconsin.org. These commentaries also posted on RENEW's blog: http://www.zmetro.com/community/us/wi/madison/renew and Madison Peak Oil Group's blog: http://www.madisonpeakoil-blog.blogspot.com

The content & opinions in this article are the author’s and do not necessarily represent the views of AltEnergyMag

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