Stanford Engineering
Energy Modeling Forum
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EMF OP 34: Oil Price Forecasting During the 1980s: What Went Wrong?

Occasional Paper

This paper reviews forecasts of oil prices over the 1980s that were made in 1980. It identifies the sources of errors due to such factors as exogenous GDP assumptions, resource supply conditions outside the cartel, and demand adjustments to price changes. Through 1986, the first two factors account for most of the difference between projected and actual prices. After 1986, misspecification of the demand adjustments becomes a particularly troublesome problem.Reprinted in 1994 from Energy Journal, June 1994, 15(2), pp 1-22 (feature article also published in The Economics of Energy, edited by Paul Stevens, Northampton, MA: Edward Elgar, 2000).

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Occasional Paper

Abstract: 

This article examines the costs of U.S. oil conservation by using parameters from five world oil models used in a recent Energy Modeling Forum study. Variation in the estimated cost of oil conservation across the models suggests that achieving oil conservation through flexible policies that adjust to market conditions would better serve economic efficiency than setting government-mandated levels of oil consumption. The analysis also finds net world oil conservation is likely to be somewhat less than gross U.S. conservation; U.S. oil conservation lowers the world oil price and stimulates non-U.S. oil consumption. When the gains in non-U.S. oil consumption are taken into account, the estimated costs of achieving a given level of conservation are higher.

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Publication Date
1994

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