The EIA computes the mean squared errors for these different forecasts and uses the information to fine-tune its models. However, for long-term forecasts they do not publish the error terms. Because the accuracy of the forecasts would not be very good, long-term forecasts should not be used to produce point estimates. Long-term forecasting models are useful for other purposes. The examples that follow demonstrate some of these uses.
Scenario analyses are useful in illustrating the variability and uncertainty of long-term forecasts.
An example is the case of natural gas forecasting. Figure 5-1 shows the historical trend in natural gas wellhead prices and forecasts future prices with a reference case and two additional scenarios. The reference case posits 1.7 percent growth per year. Scenario analysis can be quite instructive if past data are highly variable. Past variability communicates to the user that the assumption of smooth patterns of change is unwarranted but that volatility may not be predictable.