Soviet apparatchiks spent more than seven decades creating five-year plans based on their predictions about the most microscopic details of the communist USSR’s economy. And every five years, Soviet apologists would trot out a thousand excuses other than the actual reason for the continuous failures of those plans.
The failures were inevitable, of course, because the utter inability of government bureaucrats to predict much of anything about a national economy. So the plans were never more than official fantasies. America has its own apparatchiks and official fantasies, thanks to prophets laboring in the Energy Information Administration of the U.S. Department of Energy. The EIA’s record on predicting the price of a barrel of oil over the years has been about as reliable as Soviet crop projections.
Less than three years ago, EIA published its projections on the cost per barrel of oil, saying a barrel of crude would go for $33.99 by the end of 2005 and then drop into the $20 to 30 range through for the next two decades. On the high end, EIA said oil would end 2005 at $43.65 per barrel and then hover between $30 and $37 per barrel for the next 20 years. In reality, the price per barrel zoomed past $100 in early January this year and peaked at $145 per barrel last month. The problem here is that EIA predictions must be static, based on historic pricing and cost data. By contrast, the oil futures market is consistently more accurate — though mostly in the short term — because its data is dynamic, being continually revised.
The same problem hampers the EIA apparatchiks when they try to estimate how much recoverable oil and natural gas is in the ground and under the ocean. House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid, and other opponents of opening the outer continental shelf and Arctic National Wildlife Refuge to drilling incessantly cite EIA’s 2007 report that claimed there isn’t enough recoverable oil and natural gas in those locations to have any significant long-term effect on the price of gas at the pump. But just since July 14 when President Bush lifted the executive branch’s part of the drilling ban (the congressional ban ends Sept. 30 unless Congress renews it), the price has plummeted $35 per barrel from its $145 high. The gas price average at the pump is down to $3.89 from its $4.11 high. The energy apparatchiks can’t account for that, either.
