Note: I am back in Hawaii after a long road trip, so my posting frequency will return to normal. I intend to record new R-Squared Energy TVs in the near future as well.
In last week’s Energy Trends Insider our featured stories were How to Acquire Accurate Energy Data and Statistics, Investment Opportunities in Indian Energy Infrastructure, and a Subscriber Question on Cheap Natural Gas — A Threat to Chemical and Biofuels Producers. As we have done previously, we would like to share one of those stories with regular readers of this column. Interested readers can find more information on the newsletter and subscribe at Energy Trends Insider.
How to Acquire Accurate Energy Data and Statistics
Making good investment decisions requires access to timely, reliable data. There are a number of good sources of data, each with particular strengths and weaknesses. Here I discuss three that I frequently use.
The Energy Information Administration (EIA) is the statistical agency of the U.S. Department of Energy (DOE). They have been providing data and forecasts since they were established in 1977. They have about 370 federal employees and their 2012 budget is $105 million. Popular products from the EIA include This Week in Petroleum (something I read every week), Short and Long Term Energy Outlooks, Annual Energy Outlooks, numerous weekly reports on inventories, pricing, refinery utilization, etc. Their reports have the ability to move markets, and their data — particularly around U.S. energy consumption — is timely and hard to beat.
In recent years the EIA reported on a significant amount of international data as well, and I did use them for information on oil production in other countries. However, in 2011 budget cuts forced them to scale back some of their offerings, including data on international production and consumption. One casualty for 2012 was the International Energy Outlook, although they indicate that it will be published in 2013.
In recent years, the biggest weakness of the EIA has been their forecasts. If you look back at the energy outlooks from 5 or 10 years ago, you will find that they are consistently too optimistic. They overestimated oil production and underestimated oil prices by a large amount. Sometimes you see them adapting their answers to politics. For example, in 2007 EIA Administrator Guy Caruso testified before Congress that he did not see even 1 billion gallons of cellulosic ethanol being produced by 2030. When it was pointed out that this was in direct contrast to what President Bush thought about the matter, he did some backtracking on the issue. Following his testimony, future reports from the EIA were much more bullish on the topic of cellulosic ethanol.
As a result of the EIA cutbacks, a better source of international energy statistics is the International Energy Agency (IEA). The IEA is based in Paris, and their mission is to “ensure reliable, affordable and clean energy for its 28 member countries and beyond.” Some would argue that it was always a better source of international data than the EIA, but some of the IEA’s more useful publications are only available for purchase (in contrast to EIA publications). Others, such as their very useful Oil Market Report which tracks global oil supply and demand, are available for free after a two-week delay.
One data source that I eagerly anticipate each year is the annual BP Statistical Review. This report is less useful than EIA and IEA offerings for investors looking to make decisions on breaking data, but it is invaluable in helping to provide a big picture understanding of trends in the energy sector.
BP’s report covers global, regional, and in many cases country-specific energy production and consumption data for oil, gas, coal, nuclear power, and a wide range of renewables. As an example of how I use this data, you can refer to one of the five recent articles I published on the basis of BP’s recently-released 2012 report (e.g., Renewable Energy Facts and Figures).
Access to reliable data is crucial for investors, and these three sources are but a sampling of many sources that I utilize. But in my opinion they are three of the more important sources of energy information, and active investors in the energy sector should familiarize themselves with their offerings.