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Appendix H Tables
Appendix H Comparisons With Other Forecasts, and Performance of Past IEO Forecasts for 1990, 1995, and 2000
Forecast Comparisons
Three organizations provide forecasts comparable with those in the International Energy Outlook 2005 (IEO2005). The International Energy Agency (IEA) provides “business as usual” projections to the year 2030 in its World Energy Outlook 2004; Petroleum Economics, Ltd. (PEL) publishes world energy forecasts to 2025; and Petroleum Industry Research Associates (PIRA) provides projections to 2015. For this comparison, 2002 is used as the base year for all the forecasts, and the comparisons extend to 2025. Although IEA’s forecast extends to 2030, it does not publish a projection for 2025.
In addition to forecasts from other organizations, the IEO2005 projections are also compared with those in last year’s report (IEO2004). Because 2002 data were not available when IEO2004 forecasts were prepared, the growth rates from IEO2004 are computed from 2001.
Regional breakouts among the forecasting groups vary, complicating the comparisons. For example, IEO2005 and PIRA include Mexico in North America; IEA includes Mexico in Organization for Economic Cooperation and Development (OECD) North America; but PEL includes Mexico in Latin America. Because the IEA and IEO2005 provide separate forecasts for Mexico, for purposes of this comparison, Mexico has been removed from North America in the IEO2005 and IEA projections and is included with Central and South America to form a “Latin America” country grouping. Unfortunately, PIRA does not provide separate forecasts for Mexico, and so PIRA’s North American forecasts are somewhat inconsistent with the other forecasts.
Further, PIRA includes only Japan in mature market Asia, whereas mature market Asia in the IEO2005 forecast comprises Japan, Australia, and New Zealand, and the IEA forecasts an OECD Pacific that includes those three countries plus South Korea. IEO2005 includes Turkey in the Middle East, but IEA includes Turkey—as well as the Czech Republic, Hungary, Poland, and Slovakia—in “OECD Europe” (which is designated as “Western Europe” for this comparison). PEL also places Turkey in Western Europe but includes the Czech Republic, Hungary, Poland, and Slovakia in Eastern Europe, as does IEO2005. Although most of the differences involve fairly small countries, they do contribute to the variations among the forecasts.
All the forecasts provide projections out to the year 2010 (Table H1). The 2002-2010 time period shows wide variation among the forecasters’ expectations. This is, in part, reflective of the volatility experienced over the past several years in the world’s energy markets. Growth rates for energy consumption among the reference case forecasts range from 2.0 percent per year (PEL) to 2.7 percent per year (PIRA), with the IEO2005 forecast projecting 2.6 percent per year. The forecasters are in general agreement that energy demand in the mature market economies will expand more slowly than in the transitional economies, and that the fastest growth in world energy use will occur among the emerging economies. However, the IEO2005 reference case forecasts much slower energy demand growth for Western Europe than do any of the other forecasts, and in fact all the other forecasts fall above the range defined by the IEO2005 high economic growth case for the 2002 to 2010 period.
The IEA forecast anticipates much higher growth for mature market Asia than any of the other forecasts, though this may likely be the case because the IEA figures include projections for South Korea, in addition to Japan, Australia, and New Zealand. IEA’s 2002-2010 growth rate for mature market Asia exceeds that of the IEO2005 high economic growth case.
In the transitional EE/FSU region, forecasts are largely in agreement about expected growth, except for the PIRA forecast. PIRA is much more optimistic about projected growth for the EE/FSU region than any other forecast, and PIRA’s 2.7 percent per year projected growth rate for the EE/FSU falls above the IEO2005 high economic growth case of 2.5 percent per year for the 2002 to 2010 period.
The IEA projections for the developing world are also generally lower than the IEO2005 projections. The IEA growth rates are lower than the projected growth rates in IEO2005 for each developing region, and they fall below the IEO2005 low economic growth case for China and Africa. For China, the IEA’s projection of 3.4-percent annual growth in energy demand between 2002 and 2010 is substantially lower than the 6.8 percent per year forecast in the IEO2005 reference case. In part, this may be explained by China’s particularly high economic growth and corresponding energy demand growth that accompanied it in 2003 and 2004, which would not have been anticipated when the IEA forecast was being prepared for publication.
Similarly to IEA’s China forecast, PEL has a lower growth rate than the IEO2005 low economic growth case, at 4.0 percent per year. The PEL forecast (March 2004) is among the oldest of the forecasts in the comparison group, and, as with IEA, the unanticipated explosive growth in China’s energy demand in the past few years probably explains the differences between the PEL and IEO2005 forecasts. The PIRA forecast for the 2002 to 2010 period is very similar to the IEO2005 reference case projections for the developing world, with the exception of the Middle East, where PIRA projects growth in energy demand which exceeds that in the IEO2005 high economic growth case.
The IEO2005 reference case forecast is higher than in last year’s outlook for the 2000 to 2010 period, particularly for the transitional EE/FSU and emerging economy regions. For the EE/FSU, projected growth in energy use is substantially higher in IEO2005 than in IEO2004 (with demand growth averaging 2.0 percent and 1.1 percent per year, respectively, in the two forecasts). In the case of the emerging economies, much of the upward revision can be attributed to China and the other emerging Asia nations, where unexpectedly strong growth in energy demand was recorded over the past 2 years and is reflected in the 10-year forecast period. In the case of the EE/FSU, the higher forecast in IEO2005 reflects substantially higher expectations for economic growth over the time period (5.6 percent per year in IEO2005 and 4.5 percent per year in IEO2004). This growth is largely attributed to the impact of recent high world oil prices on oil exporters in the FSU.
IEO2005, PIRA, and PEL provide forecasts for energy use in 2015 (Table H2), which is the end of the PIRA forecast horizon. Their projections for worldwide growth in energy consumption between 2002 and 2015 vary from 2.0 percent per year (PEL) to 2.6 percent per year (PIRA), with IEO2005 expecting average annual growth of 2.3 percent. As it does for 2002-2010, PIRA forecasts much faster growth in energy use for the EE/FSU during 2002-2015 than does IEO2005. In China and the Middle East, PIRA’s energy growth projections exceed the IEO2005 high economic growth case forecasts. Whereas the IEO2005 reference case anticipates that China’s energy demand growth will slow in the 2010 to 2015 period, PIRA does not. The PEL growth rates are, for the most part, fairly similar to those in the IEO2005 forecast. Only the growth rates for China are substantially lower than the IEO2005 reference case; it appears that PEL did not anticipate the strong near-term growth in China, and this is reflected through the 2015 time horizon.
The IEO2005 reference case projection of worldwide growth in energy use, at 2.3 percent per year for the 2002 to 2015 period, is higher than was projected in IEO2004. By region, the largest differences between the two forecasts are within the developing world, with the IEO2004 forecasts for China, other emerging Asia, the Middle East, and Africa falling below those of the IEO2005 low economic growth case. In all cases, the forecasts for economic growth are somewhat higher, particularly for China, in IEO2005 than in IEO2004. This largely explains the upward revision in energy use in the developing regions.
IEO2005, PEL, and IEA provide energy consumption projections for 2020 (Table H3). The three forecasts have similar projections for energy demand growth from 2002 to 2020, projecting average annual increases in the world’s total energy consumption that range from 1.9 percent (IEA and PEL) to 2.1 percent (IEO2005). The highest growth rates are projected for the emerging economies and the slowest for the mature market economies. The largest variations among the regional forecasts are for China, where growth expectations for energy use range from 2.9 percent per year (IEA) to 4.6 percent per year (IEO2005). IEA is more optimistic than the other forecasts about energy demand growth in mature market Asia, where the 1.3-percent annual rate projected by IEA exceeds the rate in the IEO2005 high economic growth case.
As was the case for the 2002-2010 and 2002-2015 comparisons, China is the region with the largest differences between the IEO2005 and IEO2004 reference case forecasts for 2002-2020. The IEO2005 reference case projects annual energy demand growth for China that is a full percentage point higher than in last year’s forecast, and last year’s reference case projection is lower than that in the IEO2005 low economic growth case.
IEO2005 and PEL are the only forecasts that extend to 2025 (the IEA forecast extends to 2030, but no forecast is proffered for 2025). For the 2002 to 2025 period (Table H4), the two forecasts are largely in agreement, with the PEL projections falling within the range provided by the IEO2005 low and high economic growth cases. Again, the largest difference between the two forecasts is for China, with PEL projecting 3.5-percent average annual growth in China’s energy demand from 2002 to 2025 and IEO2005 projecting a 4.1-percent average.
The forecasts vary not only with respect to levels of total energy demand but also with respect to the mix of primary energy inputs. All the forecasts provide energy consumption projections by fuel in 2010 (Table H5). There is a wide range of views among the forecasts regarding the mix of fuels that will fulfill projected demand. Whereas IEO2005 and PIRA expect coal to be the fastest growing fuel source in the 2002 to 2010 period—at 3.1 percent per year and 3.9 percent per year, respectively—IEA and PEL expect much lower growth for coal.
IEO2005, IEA, and PEL all project fairly strong relative growth in nuclear power demand over the time period, but PIRA projects worldwide nuclear demand growth rates that are about half those of the other forecasts. IEA projects much higher growth in renewable energy use than any of the other forecasts, although all the forecasts expect growth in renewables to average 2.0 percent per year or above from 2002 to 2010. The expectations for growth in oil demand range from 1.8 percent per year (PEL) to 2.4 percent per year (IEO2005). The relatively bullish IEO2005 forecast for the 2002 to 2010 period is almost entirely due to increases in China’s oil demand. All the forecasts expect relatively strong growth in natural gas use.
The IEO2005 projections are higher than the IEO2004 projections for each energy source, largely as a result of the unanticipated strong expansion of energy demand in recent years. This year’s reassessment of the near-term forecast is so profound relative to last year’s forecast that the IEO2004 projections for every fuel type except oil fall below those in the IEO2005 low economic growth case.
PEL, PIRA, and IEO2005 provide world energy consumption projections by fuel for 2015 (Table H6). PIRA remains much more bullish in its projections for coal demand over this time period, exceeding the IEO2005 high economic growth case. In contrast, PEL is much more pessimistic about coal use over the 2002 to 2015 period, and its projected growth rate for worldwide coal demand is lower than that in the IEO2005 low economic growth case. IEO2005 expects nuclear power to expand by 1.3 percent per year, as compared with 0.9 percent per year in the PEL forecast and 0.7 percent per year in the PIRA forecast.
IEO2005, PEL, and IEA provide energy consumption projections for 2020 (Table H7). The three forecasts largely agree about the growth rate for total energy use, ranging from 1.9 percent per year (PEL and IEA) to 2.1 percent per year (IEO2005) between 2002 and 2020. That said, the projected fuel mixes differ among the forecasts. Whereas IEO2005 expects nuclear power generation to grow by 1.1 percent per year from 2002 to 2020, both IEA and PEL project much slower growth (0.6 percent and 0.7 percent per year, respectively). IEO2005 projects smaller increases in natural gas demand than the other two forecasts. IEA is more optimistic about the growth potential of renewable energy sources, projecting 2.7-percent annual growth between 2002 and 2020, as compared with the IEO2005 reference case projection of 1.9 percent and the PEL projection of 2.1 percent.
For the 2002 to 2020 period, the IEO2005 reference case projections by fuel are generally higher than in last year’s report. In particular, coal demand is expected to grow by 2.3 percent per year from 2002 to 2020 in IEO2005, but in IEO2004 coal demand was expected to increase by 1.5 percent per year. The increase in coal use relative to last year’s outlook is due to increases in demand among the emerging Asian economies.
As noted above, the only two forecasts for the 2002 to 2025 period, IEO2005 and PEL, are largely in agreement with respect to the increase in total energy demand (Table H8). PEL projects an average annual growth rate of 1.9 percent for total world demand and IEO2005 2.0 percent per year. The fuel mix does vary between the two forecasts, with PEL projecting stronger growth in natural gas use than IEO2005 (in fact, PEL’s growth rate exceeds the projected rate in the IEO2005 high economic growth case). In contrast, IEO2005 expects stronger growth in coal use and nuclear power. The IEO2005 reference case forecast shows generally higher growth on a by-fuel basis than last year’s report, except for oil, which grows slightly slower in the 2002 to 2025 period, and renewables, for which the projected growth rates are the same in the IEO2004 and IEO2005 forecasts.
Performance of Past IEO Forecasts for 1990, 1995, and 2000
In an effort to measure how well the IEO projections have estimated future energy consumption trends over the 20-year history of the series, a comparison of IEO forecasts produced for the years 1990, 1995, and 2000 is presented here. The forecasts are compared with actual data published in EIA’s International Energy Annual 2002, as part of EIA’s commitment to provide users of the IEO with a set of performance measures to assess the forecasts produced by this agency.
The IEO has been published since 1985. In IEO85, mid-term projections were derived only for the world’s market economies. That is, no projections were prepared for the centrally planned economies (CPE) of the Soviet Union, Eastern Europe, Cambodia, China, Cuba, Laos, Mongolia, North Korea, and Vietnam. The IEO85 projections extended to 1995 and included forecasts of energy consumption for 1990 and 1995 and primary consumption of oil, natural gas, coal, and “other fuels.” IEO85 projections were also presented for several individual countries and subregions: the United States, Canada, Japan, the United Kingdom, France, West Germany, Italy, the Netherlands, other OECD Europe, other OECD (Australia, New Zealand, and the U.S. Territories), OPEC, and other developing countries. Beginning with IEO86, nuclear power projections were published separately from the “other fuel” category.
Regional aggregations have changed from report to report. In 1990, the report coverage was expanded for the first time from only the market economies to the entire world. Projections for China, the FSU, and other CPE countries were provided separately. Starting with IEO94, the regional presentation was changed from market economies and CPE countries to OECD, Eurasia (China, FSU, and Eastern Europe), and “Rest of World.” Beginning in 1995 and essentially continuing until the current issue, the regional presentation changed to further group the world according to economic development: industrialized nations (essentially the OECD before the entry of South Korea and the Eastern European nations, the Czech Republic, Hungary, Poland, and Slovakia), the transitional economies of the EE/FSU, and the developing world (including China and India).
The forecast time horizon has also changed over the years (Table H9). In the first edition of the report, IEO85, projections were made for 1990 and 1995. IEO86 saw the addition of projection year 2000. In IEO91, forecasts were no longer published for 1990, but forecasts for 2010 were added to the report. The projection horizon remained the same until IEO96, when projection year 2015 was added. In 1998, the forecast was extended again, out to 2020. With IEO2003, the forecast period was extended to 2025.
Comparisons of Forecasts for Market Economies
Projections for market economies were made in the eight issues of the IEO that were published between 1985 and 1993 (no IEO was published in 1988). Historical data for total regional energy consumption in 1990 show that the IEO projections from those early years were consistently lower than the actual data for the market economies. For the four editions of the IEO printed between 1985 and 1989 in which 1990 projections were presented, total projected energy consumption in the market economies ran between 3 and 7 percent below the actual amounts published in the International Energy Annual 2001 (Figure H1). In addition, market economy projections for 1995 in the 1985 through 1993 IEO reports (EIA did not release forecasts for 1995 after the 1993 report) were consistently lower than the actual, historical 1995 data (Figure H2). Most of the difference is attributed to those market economy countries outside the OECD. Through the years, EIA’s economic growth assumptions for OPEC and other market economy countries outside the OECD have been low. The 1993 forecast was, as one might expect, the most accurate of the forecasts for 1995, but its projection for OPEC and the other market economy countries was still more than 10 percent below the actual number. Similarly to the year 1995 projections, year 2000 projections were also consistently lower than actual 2000 data in each of the IEOs published between 1986 and 1993 (Figure H3). The consumption estimates for the market economies increased in each edition, from 265 quadrillion Btu in IEO86 to 292 quadrillion Btu in IEO93. As late as 1993, the IEO forecasts were underestimating consumption of all energy sources in the market economies, by between 2 percent (oil) and 7 percent (natural gas and nuclear power). As noted above, in the 1994 edition of the IEO, the regional aggregation “market economies” was dropped altogether and replaced with delineation of member countries of the OECD, Eurasia, and Rest of World (ROW). As a result of that reorganization, it is not possible to recreate a forecast for the CPE countries: except for China, the FSU, and Eastern Europe, the remaining CPE countries—noted above—were included in “other ROW.”
Comparisons of Forecasts for Year 1995
IEO90 marked the first release of a worldwide energy consumption forecast. In IEO90 through IEO93, the forecasts for worldwide energy demand in 1995 were between 1 and 4 percent higher than the actual amounts consumed (Figure H4). Much of the difference can be explained by the unanticipated collapse of the Soviet Union economies in the early 1990s. The IEO forecasters could not foresee the extent to which energy consumption would fall in the FSU region. In IEO90, total energy consumption in the FSU was projected to reach 67 quadrillion Btu in 1995. The projection was reduced steadily in the next three IEO reports, but even in IEO93 energy demand for 1995 in the FSU region was projected to be 53 quadrillion Btu, as compared with actual 1995 energy consumption of 43 quadrillion Btu—a difference equivalent to about 5 million barrels of oil per day.
Forecasts for 1995 can also be compared in terms of their depiction of the fuel mix. Every IEO after 1990 projected the share of each energy source relative to total energy consumption within 2.6 percentage points of the actual 1995 distribution. The earliest IEOs tended to be too optimistic about the growth of coal use in the market economies (Figure H5) and too pessimistic about the recovery of oil consumption after the declines in the early 1980s that followed the price shocks caused by oil embargoes in 1973 and 1974 and the 1979-1980 revolution in Iran (Figure H6). The IEO85 and IEO86 reports projected that oil would account for only about 40 percent of total energy consumption for the market economies in 1995, whereas oil actually accounted for 45 percent of the total in 1995.
The 1995 forecasts for world coal consumption that appeared in the IEOs printed between 1990 and 1993 were consistently high, between 5 and 17 percent higher than actual coal use (Figure H7), largely because of overestimates for the FSU and Eastern Europe—regions that experienced substantial declines in coal consumption during the years following the collapse of the Soviet Union. Most of the projections for the FSU by fuel were greater than the actual consumption numbers, with the exception of hydroelectricity and other renewable resources (Figure H8). Natural gas use did not decline as much as oil and coal use, because natural gas is a plentiful resource in the region and was used extensively to fuel the domestic infrastructure; however, even the IEO estimates for 1995 natural gas use were 18 to 26 percent higher than the actual use.
The IEO projections for total energy consumption in China were below the actual 1995 consumption level in IEO90 (by 13 percent) and IEO91 (by 8 percent) but higher in IEO92 (by 6 percent) and about the same in IEO93. The underestimates in the earlier IEOs balanced, in part, the overestimates for the EE/FSU countries; however, even the 4- to 17-percent underestimate of projected 1995 coal use in China could not make up for the 29- to 58-percent overestimate of FSU coal use. In terms of other fuels, the IEO forecasts consistently overestimated China’s natural gas consumption and underestimated its oil consumption. Nuclear power forecasts were fairly close for China, within 5 percent of the actual consumption (Figure H9). It is noteworthy, however, that consumption of natural gas and nuclear power was quite small in 1995, so that any variation between actual historical consumption and the projections results in a large percentage difference. EIA consistently underestimated economic growth in China. As late as 1993, EIA expected GDP in China to grow by about 7.3 percent per year during the decade of the 1990s, whereas it actually grew by 10.7 percent per year between 1990 and 1995.
Comparisons of Forecasts for Year 2000
Ten editions of the IEO report contained worldwide forecasts for the year 2000 (IEO90 through IEO99). The forecasts of total world energy consumption for 2000 were all above, but within 5 percent of, the actual total (Figure H10). IEO97 provided the highest estimate of world energy use in 2000. This may seem surprising at first glance, but it is also true that the economic recession that would take hold in 1998 among the emerging economies of southeast Asia had not occurred and was not foreseen in the IEO97 forecast. In fact, IEO97 overestimated year 2000 energy use in emerging Asia by 9 quadrillion Btu, or about 12 percent (Figure H11), and in mature market Asia by 3 quadrillion Btu (9 percent).
Projections for the EE/FSU in IEO97 were also too optimistic, overestimating the rate of economic recovery in the region and as a result overestimating the growth in energy consumption by 12 quadrillion Btu (22 percent). IEO97 did not anticipate the August 1998 devaluation of the Russian ruble and the economic recession that followed in the FSU region. By IEO99, total EE/FSU energy use had been adjusted downward to 52 quadrillion Btu—just slightly lower than the region’s actual consumption in 2000.
The projections for year 2000 by fuel were mixed in terms of accuracy. For all energy sources except coal, total world consumption forecasts fell within 13 percent of the actual levels. As was the case with forecasts for the years 1990 and 1995, world coal consumption projections were consistently high relative to actual consumption in 2000. The world coal forecast presented in IEO90 was 30 percent higher than actual 2000 values. The forecasts for the CPE countries were responsible for the large discrepancy between projected IEO90 and actual coal consumption in 2000. In fact, IEO90 projected that the market economies would consume 2,801 million short tons of coal in 2000, and the actual estimate for coal use among the market economies was 2,969. However, in the CPE countries—including the EE/FSU—IEO90 projected that coal use would climb to 3,841 million short tons in 2000, whereas actual coal consumption was only 2,119 million short tons.
Much of the discrepancy between the IEO90 projection and actual 2000 coal consumption can be attributed to the FSU. As noted above, IEO90 did not foresee the collapse of the Soviet regime in 1990 when the report projections were prepared. Indeed, coal use in the FSU in IEO90 was expected to expand to 1,132 million short tons in 2000, whereas in reality coal use in the FSU began to decline precipitously after 1990, hitting a low of 391 million short tons in 1998 before edging up somewhat to 405 million short tons in 2000. The story was similar for Eastern Europe and the other CPE countries (excluding China), where coal use in 2000 was overestimated by 202 percent in IEO90.
The year 2000 forecasts for oil, natural gas, and hydroelectricity and other renewable energy sources were, for the most part, higher than actual levels. In contrast, projections for nuclear power were consistently lower than the actual 2000 values. Interestingly, the forecasts for the United States were largely responsible for the underestimation. Even in IEO99—the latest IEO that included projections for 2000—analysts were expecting nuclear power to begin to decline. In IEO90 there was widespread pessimism about the future of nuclear power in the mid-term, given the aftermath of Chernobyl and the problems associated with nuclear waste disposal. In the political climate of the early 1990s, IEO90 could not anticipate the life extensions and consistently improving efficiencies that have allowed nuclear power plants to generate more electricity and operate with shorter downtimes for maintenance, even without expanding their installed capacities.
The comparison of IEO projections and historical data in the context of political and social events underscores the importance of those events in shaping the world’s energy markets. Such comparisons also point out how important a model’s assumptions are to the derivation of accurate forecasts. The political and social upheaval in the EE/FSU dramatically affected the accuracy of the projections for the region. If higher economic growth rates had been assumed for China, more accurate forecasts for that region might have been achieved. It is important for users of the IEO or any other projection series to realize the limitations of the forecasts. Failing an ability to predict future volatility in social, political, or economic events, the projections should be viewed as a plausible path or trend for the future and not as a precise prediction of future events.
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