# Presentation: 057600

## Short-Term Energy Forecasting         

**David W. Costello**
**Energy Information Administration**
**United States Department of Energy**

***A Presentation to the Philippines ***
***Department of Energy***

**September 18, 1997**

## Order of Presentation

**1. Introduction to the Short-Term Integrated **
**   ****Forecasting System (including a typical forecast)**

**2. Issues in Constructing a Short-Term Energy**
**   ****Model**

**3. Toward a short-term forecasting model**
**    ****for the Philippines**

**4. Software Issues**

## The Short-Term Integrated 

**What is STIFS?**

**!**

**National-Level Model of U.S. Energy Demand, Supply, Prices**

**!**

**Based on Monthly Data Supplied by EIA  and other sources**

**!**

**Structure:**

**-**

**100 stochastic equations (46 Demand ; 36 Supply;**

**18 Price; Over 1000 variables.**

**!**

**Coverage**

**-**

**All major fuels (petroleum, natural gas, coal and **
**electricity) and sectors (where available)**

**!**

**Horizon**

**-**

**Forecast period extends 15-24 months**

**!**

**Software**

**-**

**PROC MODEL (SAS); Simulation model available**

**as Windows application (Short-Term Energy Model)**

**STIFS Outputs/Products**

**!**

**Short-Term Energy **
**Outlook**

**-**

**Updated monthly on EIA’s world **
**wide web pages.**

**!**

**Short-Term Energy **
**Model**

**-**

**Microsoft Windows version of the **
**SAS-compiled STIFS simulation/**

**forecasting model.   Available for **
**download from the EIA FTP site.**

**!**

**Energy Analysis**

**-**

**Energy tax impacts**

**The Short-Term Integrated **
**Forecasting System (STIFS)**

**Energy shocks**

**-**

**Energy demand sensitivities**

**-**

## Energy Linkages 

**Coal**
**Demand**

**Electricity**
**Supply/**
**Demand**

**Natural Gas**
**Supply/**
**Demand**

**Petroleum**
**Products**
**Demand**

**Petroleum**
**Products**
**Supply**

**Petroleum**

**Prices**

**Electricity,**
**Natural Gas,**
**and**
**Coal Prices**

**Electricity Generation from**
**Coal, Natural gas and residual fuel**

**Natural Gas Stocks and Demands**

**Natural Gas Prices**

**Diesel and**
**residual fuel prices**

**Industrial Sector**
**demand for**
**natural gas**

**Natural Gas**
**liquids**
**production**

**Motor gasoline,**
**distillate, and Jet fuel prices**

**Inventories of motor gasoline,**
**distillate, and residual fuel**

**Motor gasoline, distillate  and **
**residual fuel demands**

**Motor gasoline, distillate residua**
**fuel, and Jet fuel prices**

**Natural Gas price to**
**electric Utilities**

**Electric**
**Utility**
**demand**
**distillate**
**and**
**residual**

**Electric**
**Generation**
**from coal**

**Natural gas price**
**to Electric Utilities and**
**Industrial sector**

**Energy Linkages **
**in STIFS**

## Electricity

***Excludes power generated for own use.**

**Demand Inaputs**

**Residentia****	****l**
**Demand**

**Total Electric Utility Sales to End Users**

**Transmission,**
**Distribution Losses**
**and Discrepancy**

**Net Sales**
**by**
**Nonutilities**

**Electricity**
**Net**
**Imports**

**Coal-Fired**
**Generating**
**Capacity**

**Nuclear**
**Power**
**Generation**

**Nonutility**
**Electricity**
**Output and**
**Own Use**

**Total Electric**
**Utility Generation**
**Required**

**Coal-Fired**
**Generation**

**Other**
**Renewables**
**Generation**

**Call on**
**Oil and**
**Gas Units**

**Gas-Fired**
**Generation**

**Oil-Fired**
**Generation**

- Price Model

- Natural Gas Curtailments

- Natural Gas Model

- Petroleum Demand Models

**Hydroelectric**
**Generation**

**Commercial**
**Demand**

**Industrial**
**Demand***

**Other**
**Demand**

**Housing Stock, Employment,**
**Industrial Output, Weather,**
**Long-Term Factors**

- Coal
- Demand
- Model

- Assumed Approach to
- Normal output Levels

- Expected On-Line
- Capacity and Utilization

- Expected
- On-Line Capacity

**Electricity**
**Model**

## Natural Gas  Model

**Housing Stock, Employment,**

**Industrial Output, Weather,**

**         ****Relative Prices**

**Demand Inputs**

**Industrial**

**Demand**

**  ****Storage**

**Withdrawal**

**Spot Prices**

**     ****Rise**

**Supply Inputs**

** ****Dry Gas**

**Production**

** ****U.S. Gas**

**Productive**

** ****Capacity**

**    ****Gas**

**  ****Import**

**Capability**

**       ****Gas**

**Available From**

**    ****Storage**

**Residential**

** ****Demand**

**  ****Curtail**

**Deliveries**

**     ****Gas**

**Net Imports**

**Unacc.**

**     ****For**

**Gas Supply**

**Supplem.**

**      ****Fuels**

**Total**

** ****Gas**

**Demand**

**      ****Gas**

**Deliverability**

**Commercial**

**  ****Demand**

**Electric**

**Demand**

** ****Pipelines**

**Lease/Plant**

** ****Supply**

**Constraints**

**Exceeded?**

**Yes**

**No**

** ****Gross**

**  ****Gas**

**Supplied**

**Price Model**

**Price Model**

**Electricity**

**  ****Model**

**Electricity**

**  ****Model**

**Price Model**

**Natural Gas  Model**

## Data Flow in STIFS

**Monthly Energy**

**Demand, Supply**

**   ****Price Data**

**IMDS**

**IMDS**

**Other Energy**

**Market Data**

**Weather, Other**

**  ****Indicators**

**MANUAL**

**Macroeconomic**

**       ****Data**

** ****Income, Output**

**and Price Indexes**

**MACRO**

**Data Preparation**

**Report Writer**

** ****Expand BASE with**

**Exogenous Forecasts**

**     ****for a Scenario**

**  ****and Solve Model**

**SIMULATE**

**Reports**

**   ****Main**

**Historical**

**Database**

**BASE**

** ****Saved**

**  ****Model**

**Structure**

**Noneconomic**

**   ****Data for**

** ****Modeling**

**Seasonal Factors,**

**Dummy Variables**

** ****Trend Variables**

** ****MACRO**

**Forecasts**

** ****Oil Price**

**Assumpt..**

**Scenario**

**Solution**

**   ****File**

**Exogenous**

**  ****Energy**

**  ****Supply**

**Add Factors**

**     ****etc.**

**Estimate Regressions,**

**  ****Build and Compile**

**      ****Entire Model**

**ESTIMATE**

**Data Flow in STIFS**

## Some Demonstrated 

**Model Properties**

## World Oil Prices*

**Dollars per Barrel**

**10**

**15**

**20**

**25**

**01/95**

**07/95**

**01/96**

**07/96**

**01/97**

**07/97**

**01/98**

**07/98**

**04/95**

**10/95**

**04/96**

**10/96**

**04/97**

**10/97**

**04/98**

**10/98**

**Base**

**10% Higher**

***Imported Refiners’ Acquisition Cost**

## Retail Gasoline Price Impacts

**1.0**

**1.1**

**1.2**

**1.3**

**1.4**

**1.5**

**1.6**

**01/95**

**07/95**

**01/96**

**07/96**

**01/97**

**07/97**

**01/98**

**07/98**

**04/95**

**10/95**

**04/96**

**10/96**

**04/97**

**10/97**

**04/98**

**10/98**

**Dollars per Gallon**

**Base**

**10% Higher Oil Price**

## Energy Demand Impacts

**10% Colder Winter**

**Percent Deviation from Base**

- -1

- 0

- 1

- 2

- 3

- 4

- 5

- 6

- 04/97

- 07/97

- 10/97

- 01/98

- 04/98

- 07/98

- 10/98

## Natural Gas Market Impacts

**Total Natural Gas**

**In Underground**

**Stora**

**Natural Gas Spot**

**Price**

**Total Nat. Gas**

**Demand**

**Percent Deviation from Base**

**-5**

**-10**

**0**

**5**

**10**

**15**

**20**

**25**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Natural Gas Market Impacts**
**10% Colder Winter**

## Natural Gas Market Impacts

**Natural Gas Market Impacts**
**10% Colder Winter**

## Electricity Demand Impacts

- Residential

- Sales

- Commercial

- Sales

- Total Elec.

- Demand

**Percent Deviation from Base**

**0**

**1**

**2**

**3**

**4**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Electricity Demand Impacts**
**10% Colder Winter**

## Electricity Supply Impacts

- Total Elec. Utility

- Generation

- Elec. Utility Coal

- Generation

- Elec. Utility Nat.

- Gas Gen.

- Elec. Utility

- Petrol.

- Generation

**Percent Deviation from Base**

**-2**

**-4**

**0**

**2**

**4**

**6**

**8**

**10**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Electricity Supply Impacts**
**10% Colder Winter**

## Electricity Demand Impacts

**Residential**

**Sales**

**Commercial**

**Sales**

**Total Elec.**

**Demand**

**Percent Deviation from Base**

**0**

**1**

**2**

**3**

**4**

**5**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Electricity Demand Impacts**
**10% Hotter Summer**

## Energy Demand Impacts

- Total Energy

- Demand

- Total Petroleum

- Demand

- Total Nat. Gas

- Demand

- Total Coal

- Demand

- Total Electricity

- Sales

- Percent Deviation from Base

**0.0**

**0.5**

**1.0**

**1.5**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Energy Demand Impacts**
**1 Percent per Year Higher Economic Growth**

## A Hydroelectric Power Scenario

**10**

**15**

**20**

**25**

**30**

**35**

**01/95**

**07/95**

**01/96**

**07/96**

**01/97**

**07/97**

**01/98**

**07/98**

**04/95**

**10/95**

**04/96**

**10/96**

**04/97**

**10/97**

**04/98**

**10/98**

**A Hydroelectric Power Scenario**
**Continued High Hydroelectric Availability**

**Base**

**No Change from**
**Previous Year**

**Billion Kilowatt-hours**

## Electricity Supply Impacts

**Elec. Utility**

**Hydro.**

**Generation Bill**

**Kwh**

**Elec. Utility Coal**

**Generation Bill**

**Kwh**

**Elec. Utility Nat.**

**Gas Gen. Bill**

**Kwh**

**Deviation from Base**

**-2**

**-4**

**-6**

**0**

**2**

**4**

**6**

**8**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Electricity Supply Impacts**
**Continued High Hydroelectric Availability**

**Billion Kilowatt-hours**

## Electricity Supply Impacts

**Elec. Utility**

**Hydro.**

**Generation Bill**

**Kwh**

**Elec. Utility Coal**

**Generation Bill**

**Kwh**

**Elec. Utility Nat.**

**Gas Gen. Bill**

**Kwh**

**Deviation from Base**

- -2

- -4

- -6

- 0

- 2

- 4

- 6

- 8

- 04/97

- 07/97

- 10/97

- 01/98

- 04/98

- 07/98

- 10/98

**Electricity Supply Impacts**
**High Hydroelectric on West Coast**

**Billion Kilowatt-hours**

## Natural Gas Market Impacts

**High Hydro Case**

**Total Natural Gas**

**In Underground**

**Storage**

**Natural Gas Spot**

**Price**

**Total Nat. Gas**

**Demand**

**Percent Deviation from Base**

**-1**

**-2**

**-3**

**-4**

**-5**

**-6**

**0**

**1**

**2**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

## EIA’s Latest Forecast

**EIA’s Latest Forecast**

***Released on the Internet***
***September 8, 1997***

## Gasoline Prices

**Gasoline Prices**

**- Demand High, Supplies Tight, Prices Up **

**- Crude Market Calm to Weak**

**- Gasoline Price Spike Should Dissipate**

**- However, Low Stocks Threaten Continued**
**   ****Higher Prices If Supply Assumptions Not Met**

## Average Monthly Gasoline Prices

**Average Monthly Gasoline Prices**

**0**

**0.6**

**0.7**

**0.9**

**1.0**

**1.2**

**1.3**

**1.5**

**1.6**

**01/95**

**07/95**

**01/96**

**07/96**

**01/97**

**07/97**

**01/98**

**07/98**

**04/95**

**10/95**

**04/96**

**10/96**

**04/97**

**10/97**

**04/98**

**10/98**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Dollars per Gallon**

**Current**

**Previous**

**Current**

**Previous**

***Retail***

***Wholesale***

## Gasoline Price Update:

**Gasoline Price Update:**
**(Changes from Previous Month’s Forecast)**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**0.00**

**0.04**

**0.08**

**0.12**

**0.16**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Dollars per Gallon**

**Wholesale**

**Retail**

***Mid-Summer Spike Should dissipate Quickly as the Driving Season Closes***

## World Oil Prices*

**World Oil Prices***

*** Refiners' Acquisition Cost of Imported Oil**

**0**

**14**

**18**

**22**

**26**

**01/95**

**07/95**

**01/96**

**07/96**

**01/97**

**07/97**

**01/98**

**07/98**

**04/95**

**10/95**

**04/96**

**10/96**

**04/97**

**10/97**

**04/98**

**10/98**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Dollars per Barrel**

## Total Gasoline Stocks

**Total Gasoline Stocks**

**1995**

**1997**

**150**

**170**

**190**

**210**

**230**

**250**

**Jan**

**Feb**

**Mar**

**Apr**

**May**

**Jun**

**Jul**

**Aug**

**Sep**

**Oct**

**Nov**

**Dec**

**1996**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Million Barrels**

## Natural Gas Prices

**Natural Gas Prices**

**- Spot Prices Moving Up Early**

**- Signs of Supply Tightness in U.S.**

**- Gas Storage Situation Marginal**

**- Cold Autumn Could Spell Very High Gas **
**  ****Prices in the U.S.**

## Average Natural Gas Spot Prices

**0.0**

**0.5**

**1.0**

**1.5**

**2.0**

**2.5**

**3.0**

**3.5**

**4.0**

**01/95**

**07/95**

**01/96**

**07/96**

**01/97**

**07/97**

**01/98**

**07/98**

**04/95**

**10/95**

**04/96**

**10/96**

**04/97**

**10/97**

**04/98**

**10/98**

**Average Natural Gas Spot Prices**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Dollars per mcf**

**Current**

**Previous**

## Dry Gas Production

**0**

**1.3**

**1.4**

**1.5**

**1.6**

**1.7**

**1.8**

**01/95**

**04/95**

**07/95**

**10/95**

**01/96**

**04/96**

**07/96**

**10/96**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Dry Gas Production**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Trillion Cubic Feet**

**	****      ****Annual **
**	****Current****	****Previous**
**1997****	****  18.92****	****  19.13**
**1998****	****  19.21****	****  19.52**

**Current**

**Previous**

## Gas Storage Update*

**-10**

**-20**

**-30**

**-40**

**0**

**10**

**01/97**

**04/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Gas Storage Update***
**(Change from Previous Month’s Forecast)**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Billion Cubic Feet**

**07/97**

***Note: Storage information estimated through August 1997 based in part on American Gas Association storage data**

## Total Gas In Underground Storage

**Total Gas In Underground Storage**

**1995**

**1996**

**0**

**5000**

**5500**

**6000**

**6500**

**7000**

**7500**

**Jan**

**Feb**

**Mar**

**Apr**

**May**

**Jun**

**Jul**

**Aug**

**Sep**

**Oct**

**Nov**

**Dec**

**Billion Cubic Feet**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**1997**

## Petroleum Demand/Supply

**Petroleum Demand/Supply**

**- Transportation Fuel Demand Still Leads**
**  ****(Especially Diesel)**

**- U.S. Oil Demand Continues Modest Upward**
**  ****Pace**

**- U.S. Production Performance Looking **
** ****Better in Short-Run**

## U.S. Crude Oil Production

**0**

**6200**

**6400**

**6600**

**6800**

**01/95**

**04/95**

**07/95**

**10/95**

**01/96**

**04/96**

**07/96**

**10/96**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**U.S. Crude Oil Production**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**	****      ****Annual **
**	****Current****	****Previous**
**1997****	****  6.42****	****   6.41**
**1998****	****  6.42****	****   6.33**

**Million Barrels per Day**

**Current**

**Previous**

## Natural Gas Demand

**Natural Gas Demand**

**- Prospects for Higher Prices **
** ****Mostly Responsible**

**- Demand Forecast Down Some**

**- Still, Winter Demand Growth **
** ****Should be Strong with Normal Weather**

## Gas Demand Update

**-0.01**

**-0.02**

**-0.03**

**0.00**

**0.01**

**0.02**

**0.03**

**01/97**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Gas Demand Update**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Trillion Cubic Feet**

**Difference in Total Gas Demand**
**September vs August Forecast**

## Relative Fuel Price Movements

**-0.05**

**-0.10**

**-0.15**

**-0.20**

**0.00**

**0.05**

**0.10**

**0.15**

**0.20**

**0.25**

**0.30**

**04/97**

**07/97**

**10/97**

**01/98**

**04/98**

**07/98**

**10/98**

**Relative Fuel Price Movements**
**(Change from Previous Month’s Forecast)**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

**Dollars per Million Btu**

**Residual Fuel**

**Natural Gas**

***Based on delivered prices to electric utilities***

## Electricity

**Electricity**

**- Weather Factors Responsible**

**- Growth Weak so Far This Year**

**- Thus, Prospects for Above-Normal **
** ****Growth Next Year Good**

## Electricity/Degree-Day Analysis

**Electricity/Degree-Day Analysis**
**(Percent Change from Previous Year)**

**Residential**

**Sales**

**U.S. Htg.**

**Deg.-Days**

**U.S. Cooling**

**Degree-Days**

**-10**

**-20**

**-30**

**-40**

**0**

**10**

**20**

**30**

**40**

**96Q1**

**96Q3**

**97Q1**

**97Q3**

**98Q1**

**98Q3**

***Heating and Cooling Demand***
***Generally Down so far this Year***

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

## Electricity Demand Growth 

**Electricity Demand Growth **
**(Percent Change from Previous Year)**

***Source: Energy Information Administration, Short-Term Energy Model, September 1997***

## Electricity Demand Growth

**Total Electricity**

**Sales**

**Residential**

**Sales**

**Year to Year Percent Change**

**-1**

**-2**

**-3**

**0**

**1**

**2**

**3**

**4**

**5**

**6**

**1996**

**1997**

**1998**

**Electricity Demand Growth**
**Base Case (Normal Weather)**

## Electricity Demand Growth

- Total Electricity

- Sales

- Residential

- Sales

**Year to Year Percent Change**

**-1**

**-2**

**-3**

**0**

**1**

**2**

**3**

**4**

**1996**

**1997**

**1998**

**Electricity Demand Growth**
**Unchanged Weather**

## Natural Gas Demand Growth

- Total Nat. Gas

- Demand

- Residential NG

- Demand

**Year to Year Percent Change**

- -2

- -4

- -6

- 0

- 2

- 4

- 6

- 8

**1996**

**1997**

**1998**

**Natural Gas Demand Growth**
**Base Case (Normal Weather)**

## Natural Gas Demand Growth

**Unchanged Winter**

**Total Nat. Gas**

**Demand**

**Residential NG**

**Demand**

**Year to Year Percent Change**

- -2

- -4

- -6

- 0

- 2

- 4

- 6

- 8

- 1996

- 1997

- 1998

## Typical Forecasting Cycle for

**!**

**Read in all new monthly energy data collected by **
**EIA since previous forecast**

**!**

**Collect external data updates (new weather, macroeconomic**
**and other non-EIA energy market data)**

**-**

**!**

**Generate all required data tranformations**

**!**

**Re-estimate model estimating equations**

**!**

**Include enhancements, model changes**

**!**

**Save model code**

**Typical Forecasting Cycle for**
**EIa’s Short-Term Energy Outlook**

**!**

**Capture any revisions to previous historical data**

**Update Model Structure (optional?)**

**Test Updated Model Performance**

**!**

**Run preliminary simulation/updated forecast**

**!**

**Check for errors, debug model code, reestimate if necessary**

**Ouput and Distribution**

**!**

**Make final adjustments to updated inputs/assumptions**

**!**

**Make final runs, save solutions, generate reports**

**!**

**Conduct final review, compose reports, tables, documents, etc.**

**!**

**Post Information on Internet/print and mail**

**Archival**

## Slide 46

## Slide 47

## U.S. and Philippine Diesel Prices

**0 **

**0.4 **

**0.8 **

**1.2 **

**1.6 **

- Index (8501=1.000)

**8501**

**8601**

**8701**

**8801**

**8901**

**9001**

**9101**

**9201**

**9301**

**9401**

**9501**

**9601**

**9701**

**9801**

**Phil.**

**U.S.**

**U.S. and Philippine Diesel Prices**

## U.S. and Philippine Jet Fuel Prices

**0 **

**0.4 **

**0.8 **

**1.2 **

**1.6 **

- Index (8501=1.000)

**8501**

**8601**

**8701**

**8801**

**8901**

**9001**

**9101**

**9201**

**9301**

**9401**

**9501**

**9601**

**9701**

**9801**

**Phil.(Av Turbo)**

**U.S.**

**U.S. and Philippine Jet Fuel Prices**

## U.S. and Philippine Fuel Oil Prices

**0 **

**0.4 **

**0.8 **

**1.2 **

- Index (8501=1.000)

**8501**

**8601**

**8701**

**8801**

**8901**

**9001**

**9101**

**9201**

**9301**

**9401**

**9501**

**9601**

**9701**

**9801**

**Phil.**

**U.S.**

**U.S. and Philippine Fuel Oil Prices**

## U.S. and Philippine LPG Prices

**0 **

**0.4 **

**0.8 **

**1.2 **

**1.6 **

- Index (8501=1.000)

**8501**

**8601**

**8701**

**8801**

**8901**

**9001**

**9101**

**9201**

**9301**

**9401**

**9501**

**9601**

**9701**

**9801**

**Phil.**

**U.S. and Philippine LPG Prices**

## Philippine Petroleum Demand per Capita

**0.0000 **

**0.0010 **

**0.0020 **

**0.0030 **

**0.0040 **

**0.0050 **

**0.0060 **

- Barrels per Person-Day

**1970**

**1972**

**1974**

**1976**

**1978**

**1980**

**1982**

**1984**

**1986**

**1988**

**1990**

**1992**

**1994**

**1996**

**1998**

**Philippine Petroleum Demand per Capita**

## Philippine Output per Capita

**0.00 **

**3.00 **

**6.00 **

**9.00 **

**12.00 **

**15.00 **

**18.00 **

**Thous. 1985 Pesos per Person**

**1970**

**1972**

**1974**

**1976**

**1978**

**1980**

**1982**

**1984**

**1986**

**1988**

**1990**

**1992**

**1994**

**1996**

**1998**

**Philippine Output per Capita**

- Proj.

- History

## Real Philippine Oil Price*

**0.00 **

**1.00 **

**2.00 **

**3.00 **

**4.00 **

- Index 1970=1.00

**1970**

**1972**

**1974**

**1976**

**1978**

**1980**

**1982**

**1984**

**1986**

**1988**

**1990**

**1992**

**1994**

**1996**

**1998**

**Real Philippine Oil Price***

**(Deflator Used: 1985 Base Phil. GDP Deflator**

- Proj.

- History

*** U.S.  Imported RAC used**

## Philippine Urban Population Share

**0.0%**

**20.0%**

**40.0%**

**60.0%**

**80.0%**

**100.0%**

**Percent**

**1970**

**1972**

**1974**

**1976**

**1978**

**1980**

**1982**

**1984**

**1986**

**1988**

**1990**

**1992**

**1994**

**1996**

**1998**

**Philippine Urban Population Share**

**Proj.**

**History**

## A Simple Philippine 

- PDCAP		=	Philippine petroleum demand per capita
- YCAP		=	Philippine real GDP per capita
- RPOIL		=	Philippine real oil price
- UPOPSH	=	Philippine urban population share
- TIME		=	Integer-valued trend variable
**Parameters:**
- B0, B1, B2, B3, B4
**Model 1 (linear)**
- PDCAP=B0 +B1*YCAP + B2*RPOIL + B3*UPOPSH +B4*TIME
**Model 2 (log-linear)**
- PDCAP=exp(B0+B1*log(YCAP)+ B2*log(RPOIL) + B3*log(UPOPSH) + 		   B4*TIME)

**A Simple Philippine **
**Petroleum Demand Model**

## Model 1 Estimation Results

-             DF    DF                                                          		                 Durbin

- Equation  Model Error         SSE         MSE    Root MSE       R-Sq  Adj R-Sq  Watson

- PDCAP         5    19  3.42441E-6  1.80232E-7   0.0004245    0.6857    0.6196   0.853

- Nonlinear OLS Parameter Estimates

-                          Approx.       'T'   Approx.

- Parameter    Estimate     Std Err     Ratio  Prob>|T|

- B0          -0.025122   0.0046963     -5.35    0.0001

- B1         0.00076493   0.0002115      3.62    0.0018

- B2         0.00013805   0.0002506      0.55    0.5882

- B3           0.071216     0.01217      5.85    0.0001

- B4        -0.00068422   0.0001134     -6.03    0.0001

**Model 1 Estimation Results**

## Model 2 Estimation Results

-             DF    DF                                                          		                 Durbin

- Equation  Model Error         SSE         MSE    Root MSE       R-Sq  Adj R-Sq  Watson

**Model 2 Estimation Results**

- Model 2     5       19        0.39228     0.02065   0.14369       0.4660    0.3536    0.541

- Nonlinear OLS Parameter Estimates

-                          Approx.       'T'   Approx.

- Parameter    Estimate     Std Err     Ratio  Prob>|T|

- B0          -6.027461     3.53211     -1.71    0.1042

- B1           3.256529     0.82925      3.93    0.0009

- B2          -0.225947     0.14089     -1.60    0.1253

- B3           5.854206     3.24108      1.81    0.0867

- B4          -0.159408     0.06469     -2.46    0.0234

## Model 1 Residuals

**-0.00060 **

**-0.00040 **

**-0.00020 **

**0.00000 **

**0.00020 **

**0.00040 **

**0.00060 **

**0.00080 **

**0.00100 **

**Barrels per person-day**

**1975**

**1977**

**1979**

**1981**

**1983**

**1985**

**1987**

**1989**

**1991**

**1993**

**1995**

**Model 1 Residuals**

## Model 2 Residuals

**-0.00100 **

**-0.00050 **

**0.00000 **

**0.00050 **

**0.00100 **

**0.00150 **

**Barrels per person-day**

**1975**

**1977**

**1979**

**1981**

**1983**

**1985**

**1987**

**1989**

**1991**

**1993**

**1995**

**Model 2 Residuals**

## A Simple Philippine 

- PDCAP		=	Philippine petroleum demand per capita
- YCAP		=	Philippine real GDP per capita
- RPOIL		=	Philippine real oil price
- UPOPSH	=	Philippine urban population share
- POSTIRAN	=	Post-Iranian Dummy
**Parameters:**
- B0, B1, B2_1, B3, B4
**Model 2a (log-linear)**
- PDCAP=PDCAP(-1)*exp(B0+B1*(log(YCAP)-log(YCAP(-1))) +
-             B2_1*(log(RPOIL(-1))-log(RPOIL(-2)))+
-            B3*(log(UPOPSH)-log(UPOPSH(-1)))+ B4*POSTIRAN)

**A Simple Philippine **
**Petroleum Demand Model - Revisited**

## Model 2a Estimation Results

-             DF      DF                                                         		                 Durbin

- Equation  Model Error         SSE         MSE    Root MSE       R-Sq  Adj R-Sq  Watson

**Model 2a Estimation Results**

- Model 2a     5    18        0.04188    0.0023269   0.04824    0.9410    0.9279   2.649

- Nonlinear OLS Parameter Estimates

-                          Approx.       'T'   Approx.

- Parameter    Estimate     Std Err     Ratio  Prob>|T|

- B0          -0.040961     0.04046     -1.01    0.3248

- B1           1.511046     0.33242      4.55    0.0003

- B2_1        -0.085985     0.03822     -2.25    0.0372

- B3           1.369695     0.94525      1.45    0.1645

- B4          -0.072656     0.02327     -3.12    0.0059

## Model 2a Residuals

**-0.00040 **

**-0.00020 **

**0.00000 **

**0.00020 **

**0.00040 **

**Barrels per person-day**

**1975**

**1977**

**1979**

**1981**

**1983**

**1985**

**1987**

**1989**

**1991**

**1993**

**1995**

**Model 2a Residuals**

## Philippine Petroleum Demand

**0.0000 **

**0.0010 **

**0.0020 **

**0.0030 **

**0.0040 **

**0.0050 **

**0.0060 **

**0.0070 **

- Barrels per Person-Day

**1975**

**1977**

**1979**

**1981**

**1983**

**1985**

**1987**

**1989**

**1991**

**1993**

**1995**

**Philippine Petroleum Demand**

**Static Simulation vs Actual**

**Actual**

**Pred.**

## Philippine Petroleum Demand

**0.0000 **

**0.0010 **

**0.0020 **

**0.0030 **

**0.0040 **

**0.0050 **

**0.0060 **

**0.0070 **

**Barrels per Person-Day**

**1975**

**1977**

**1979**

**1981**

**1983**

**1985**

**1987**

**1989**

**1991**

**1993**

**1995**

**Static**

**Dynamic**

**Philippine Petroleum Demand**

**Static vs Dynamic Simulations**

## Petroleum Demand per Capita & Forecast

**0.0000 **

**0.0010 **

**0.0020 **

**0.0030 **

**0.0040 **

**0.0050 **

**0.0060 **

**0.0070 **

**Barrels per Person-Day**

**1975**

**1977**

**1979**

**1981**

**1983**

**1985**

**1987**

**1989**

**1991**

**1993**

**1995**

**1997**

**Petroleum Demand per Capita & Forecast**

**Proj.**

**History**

## Petroleum Demand Impacts

**-20.0%**

**-10.0%**

**0.0%**

**10.0%**

**20.0%**

**30.0%**

**40.0%**

**50.0%**

**60.0%**

**Percent from baseline**

**1**

**2**

**3**

**4**

**5**

**6**

**Demand**

**Price**

**Petroleum Demand Impacts**

**Oil Price Spike**

## Petroleum Demand Impacts

**0.0%**

**2.0%**

**4.0%**

**6.0%**

**8.0%**

**10.0%**

**12.0%**

**Percent from Baseline**

**1**

**2**

**3**

**4**

**5**

**6**

**Demand**

**Income**

**Petroleum Demand Impacts**

**High Economic Growth**

## Standard Forecast Errors

**- Account for Stochastic Nature of Model**
** ****Equations and Exogenous Variables**

**- Generated in Monte Carlo Procedure**

**- Requires Information on Regression**
** ****Equation Errror Distributions and Parameter**
** ****Covariances**

**- Also, Need Information on Probability**
** ****Distributions of Exogenous Inputs**

**- Measures of Forecasting Uncertainty**

**- Repeated Simulation following Random**
** ****Draws from Equation Error Distributions**
** ****and Parameter Distributions**

## ∑

- forecast standard error for endogenous variable i,
- time period t

- = solution value for endogenous variable i, random
-    simulation repetition j, time period t

- = mean solution value for endogenous variable i, across
-   all random simulation repetitions, time period t

*R* = number of repetitions

*s*

*R*

*Y*

*Y*

*i*

*t*

*i*

*j*

*t*

*i*

*t*

*j*

*R*

- ,

- (

- /

- (

- ))

- (

- )

- ,

- ,

- ,

- /

- =

- −

- −

- ⎧

- ⎨

- ⎩

- ⎫

- ⎬

- ⎭

- =

- 1

- 1

- 2

- 1

- 1

- 2

- )

*τ*

## Slide 71

## Quarterly Average Forecast Coefficients of

- Quarters Ahead

- __________________________________________________________________________________________

- 1

- 2

- 3

- 4

- 5

- 6

- 7

- 8

- _________________________________________________________________________________________________________________________

- Oil Price and Macroeconomic Projections

-  Refiner Acquisition Cost of Imported Crude Oil

- 12.2

- 23.8

- 30.4

- 36.3

- 39.9

- 39.7

- 42.6

- 46.0

-  Real Personal Disposable Income

- 0.4

- 1.0

- 1.4

- 1.8

- 2.1

- 2.5

- 2.7

- 3.0

-  Industrial Production Index, Manufacturing

- 0.8

- 1.2

- 1.5

- 1.8

- 2.0

- 2.4

- 2.6

- 2.9

- Prices

-  Motor Gasoline

- 3.5

- 7.0

- 9.6

- 11.9

- 13.9

- 13.9

- 14.8

- 16.5

-  Residential Heating Oil

- 5.2

- 10.8

- 14.0

- 15.6

- 17.4

- 18.4

- 20.7

- 20.9

-  Residual Fuel Oil

- 13.9

- 26.5

- 34.1

- 36.6

- 36.9

- 38.0

- 42.9

- 58.5

-  Residential Electricity

- 0.9

- 1.1

- 1.2

- 1.2

- 1.4

- 1.7

- 1.8

- 2.2

-  Wellhead Natural Gas

- 6.0

- 12.6

- 16.3

- 16.8

- 18.7

- 22.2

- 21.9

- 22.4

-  Residential Natural Gas

- 1.4

- 1.9

- 2.6

- 3.0

- 3.3

- 3.7

- 4.2

- 4.5

-  Electric Utility Coal

- 0.9

- 1.3

- 1.6

- 1.8

- 2.0

- 2.3

- 2.5

- 2.4

- Petroleum

-  Total Petroleum Demand

- 1.9

- 2.1

- 2.3

- 2.6

- 2.6

- 2.6

- 2.5

- 8.8

-  Motor Gasoline Demand

- 1.9

- 2.2

- 2.5

- 2.5

- 2.7

- 2.6

- 2.6

- 2.7

-  Distillate Fuel Oil Demand

- 4.8

- 5.3

- 5.2

- 5.5

- 4.9

- 5.3

- 5.7

- 13.9

-  Residual Fuel Oil Demand

- 10.6

- 15.0

- 17.6

- 16.8

- 16.6

- 18.3

- 20.0

- 41.5

-  Jet Fuel Demand

- 3.4

- 4.2

- 5.0

- 5.8

- 6.2

- 6.5

- 7.5

- 8.0

-  Other Petroleum Products Demand

- 3.1

- 2.9

- 3.1

- 3.8

- 3.8

- 3.6

- 3.6

- 14.9

-  Total Domestic Crude Oil Production

- 1.8

- 2.7

- 3.4

- 3.9

- 4.6

- 4.6

- 5.1

- 5.7

-  Alaska Crude Oil Production

- 4.6

- 6.8

- 8.8

- 10.5

- 12.6

- 14.0

- 15.9

- 17.9

-  Lower 48 Crude Oil Production

- 1.9

- 2.7

- 3.3

- 3.7

- 4.4

- 4.7

- 5.1

- 5.6

-  Net Oil Imports

- 9.4

- 9.3

- 9.4

- 11.1

- 12.5

- 11.9

- 10.9

- 24.1

-  Total Petroleum Stocks

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- Natural Gas

-  Natural Gas Consumption

- 3.0

- 6.1

- 15.9

- 11.3

- 6.7

- 12.4

- 27.1

- 20.4

-  Natural Gas Production

- 4.5

- 6.8

- 10.1

- 10.4

- 8.5

- 9.7

- 22.3

- 12.8

- Coal

-  Domestic Coal Consumption

- 3.6

- 5.8

- 6.0

- 6.7

- 6.9

- 8.6

- 7.5

- 7.8

-  Coal Production

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- 0.0

- Electricity

-  Total Electricity Sales

- 3.0

- 4.9

- 5.0

- 5.6

- 5.8

- 6.6

- 5.9

- 6.4

-  Residential Electricity Sales

- 2.7

- 3.5

- 3.1

- 3.5

- 3.2

- 3.4

- 3.0

- 3.5

-  Commercial Electricity Sales

- 1.1

- 1.6

- 1.6

- 2.0

- 2.0

- 1.8

- 1.7

- 1.8

-  Industrial Electricity Sales

- 0.9

- 1.6

- 2.0

- 2.4

- 2.8

- 3.0

- 3.1

- 3.5

-  Generation by Fuel

-    Coal

- 4.6

- 7.3

- 7.6

- 8.4

- 8.8

- 10.9

- 9.4

- 9.9

-    Petroleum

- 20.2

- 29.3

- 32.3

- 41.7

- 38.2

- 37.1

- 35.3

- 58.3

-    Natural Gas

- 16.6

- 21.4

- 20.7

- 30.2

- 31.7

- 31.8

- 27.5

- 42.1

-    Nuclear Power

- 5.4

- 9.3

- 9.7

- 11.6

- 12.5

- 14.4

- 13.7

- 15.3

-    Hydroelectric Power

- 10.0

- 12.2

- 17.9

- 18.4

- 18.9

- 18.7

- 24.4

- 25.4

- _________________________________________________________________________________________________________________________

**Quarterly Average Forecast Coefficients of**
**Variation for Selected Variables (percent)**

## Toward a Short-Term Forecasting Model

**!**

**What’s the model for?**

**!**

**How detailed should it be?**

**!**

**What should be the scope/coverage?**

**-**

**!**

**Identify the concepts to be forecasted**

**!**

**Model Estimation/Parameterization**

**Toward a Short-Term Forecasting Model**

**!**

**Who’s the audience?**

**Formal Model Development**

**!**

**Consider alternative forecasting methodologies**
** ****- theoretical/atheoretical**

**!**

**Derive forecasting relationships:**
** ****- economic theory; engineering; institutional knowledge**

**Empirical Analysis/Diagnostics**

**!**

**What is a realistically manageable size/complexity?**

**!**

**Test (Limited) Alternative Structures**

**!**

**Test Model Sensitivities**

**!**

**Develop track record**

**!**

**Choose “Best” Model**

## Software Issues

**Software Issues**

**- Integrated Database**

**- Estimation/Simulation Software**

**- Output**
**	****- Reporting**
**	****- Ancillary Programs (Graphics/Spreadsheets)**

**- Distribution**
**	****- Desktop Publishing**
**	****- Internet/Intranet**

## Contacts

**	****David Costello (202/586-1468)**
**World Oil Prices/International Petroleum **
**	****Doug MacIntyre (202-586-1831)**
**Macroeconomic**** **
**	****Kay A. Smith (202-586-1455)**
**Energy Product Prices **
**	****Neil Gamson (202-586-2418)**
**Petroleum Demands **
**	****Michael Morris (202-586-1199)**
**Petroleum Supply **
**	****Tancred Lidderdale (202-586-7321)**
**	****A.H. Payne (214-720-6160)**
**Natural Gas **
**	****Evelyn Amerchih (202-586-8760)**
**	****Hafeez Rahman (214-720-6160)**
**Coal **
**	****Elias Johnson (202-586-7277)**
**	****Byung Doo Hong (202-426-1126)**
**Electricity**** **
**	****Evelyn Amerchih (202-586-2867)**
**	****Rebecca McNerney(202-426-1251)**

**Contacts**