Comparing Price Forecast Accuracy of Natural Gas Models and Futures Markets

Date Published
06/2005
Publication Type
Report
Authors
LBL Report Number
LBNL-58008
Abstract

The purpose of this article is to compare the accuracy of forecasts for natural gas prices as reported by the Energy Information Administration's Short-Term Energy Outlook (STEO) and the futures market for the period from 1998 to 2003. The analysis tabulates the existing data and develops a statistical comparison of the error between STEO and U.S. wellhead natural gas prices and between Henry Hub and U.S. wellhead spot prices. The results indicate that, on average, Henry Hub is a better predictor of natural gas prices with an average error of 0.23 and a standard deviation of 1.22 than STEO with an average error of -0.52 and a standard deviation of 1.36. This analysis suggests that as the futures market continues to report longer forward prices (currently out to five years), it may be of interest to economic modelers to compare the accuracy of their models to the futures market. The authors would especially like to thank Doug Hale of the Energy Information Administration for supporting and reviewing this work.

Notes

Journal, Energy Policy, August 13-18, 2006

Year of Publication
2005
Institution
Lawrence Berkeley National Laboratory
City
Berkeley
Keywords
Organizations
Research Areas
File(s)
Download citation