Remember when natural gas had a limited future in the U.S. and oil production worldwide was running out? A decade ago, the fracking revolution hit, changing the prospects for gas and consigning “peak oil” to the dustbin of history.
All the conventional forecasts were 180 degrees wrong. In the years since horizontal drilling and hydraulic fracturing revolutionized gas and oil production, coal has been dethroned as king of the generating hill, nuclear has become largely irrelevant, and the U.S. has reversed a generation of being an importer of oil beholden to monopolist producers, many in the politically unstable Middle East.
A new paper in the academic journal Energy Transitions – “Interrogating uncertainty in energy forecasts: the case of the shale gas boom” – asks what have prognosticators gotten wrong over the years, and are there ways to improve energy forecasts. A group of Colorado academics, led by Adam Reed of Endymion Research & Consulting in Boulder and authors from the University of Colorado, the Colorado School of Mines, and the Rocky Mountain Institute, note of the shale revolution, “Despite the enormity of this change, it was hardly, or not at all, predicted or projected by forecasters, analysts, or industry experts even a year or two before its emergence.”
Echoing famous comments of former Defense Secretary Donald Rumsfeld, the paper looks at “two significant types of uncertainty: epistemic (unknown unknowns) and stochastic (known unknowns).” Modeling, the article says, inherently has contradictions between the two types of uncertainty. The “two domains of prediction – the world of the model and the world the model attempt to simulate – are often unconsciously confused or conflated, especially by the consumers of energy forecasts who do not themselves deal directly with forecast intricacies: industry analysts, scientists, advocates, and policymakers, among others.”
How to solve this conundrum? The article leaves about as much confusion as it describes as the problem: “We conclude with a call for new and innovative discourse models for disussion uncertainty in energy forecasting, both within the modeling community itself and its engagements with decision-makers.”
This conclusion recalls the 1984 presidential campaign of Colorado Democratic Sen. Gary Hart, who offered a series of largely anodyne policy prescriptions, which he billed as a campaign of “new ideas.” During a debate, former Vice President Walter Mondale retorted, drawing on a popular TV advertisement for the Wendy’s hamburger chain, “When I hear your new ideas, I’m reminded of that ad, ‘Where’s the beef?’” Mondale won the nomination and was crushed in the general election by President Ronald Reagan.
Energy prediction has a long and largely tarnished record. A classic example is the 1980 report by President Jimmy Carter’s Council on Environmental Quality, led by Gus Speth. Looking at the energy past – oil embargoes, gasoline lines, and the like – Speth predicted gloom and doom for U.S. energy consumers as soon as 1985. The report was the product of an eminent assemblage of credentialed graybeards.
I panned the CEQ report at the time, commenting that science fiction writers had a far better record of predicting the future than such “expert” reports. My point was that such endeavors are generally worthless and self-serving. Speth has not returned my phone calls since.
In 1986, after the Reagan administration completed decontrol of oil prices (started by Carter), world crude oil prices crashed. “Energy crisis” vanished from the headlines.
It’s also worth noting that Carter’s first energy secretary, the late Jim Schlesinger, was, up to his death, a leading proponent of “peak oil,” another bogus energy prediction that has never come to pass.
The Energy Transitions article concludes, “Decision-makers and investors would benefit from learning more about why they were caught unawares by the shale revolution, and how they can be better prepared the next time such a surprise occurs. The answer to that second question is not immediately apparent.”
Well, duh.
— Kennedy Maize