Comparing Price Forecast Accuracy of Natural Gas Models andFutures Markets

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The purpose of this article is to compare the accuracy of forecasts for natural gas prices as reported by the Energy Information Administration's Short-Term Energy Outlook (STEO) and the futures market for the period from 1998 to 2003. The analysis tabulates the existing data and develops a statistical comparison of the error between STEO and U.S. wellhead natural gas prices and between Henry Hub and U.S. wellhead spot prices. The results indicate that, on average, Henry Hub is a better predictor of natural gas prices with an average error of 0.23 and a standard deviation of 1.22 than STEO with ... continued below

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Wong-Parodi, Gabrielle; Dale, Larry & Lekov, Alex June 30, 2005.

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Description

The purpose of this article is to compare the accuracy of forecasts for natural gas prices as reported by the Energy Information Administration's Short-Term Energy Outlook (STEO) and the futures market for the period from 1998 to 2003. The analysis tabulates the existing data and develops a statistical comparison of the error between STEO and U.S. wellhead natural gas prices and between Henry Hub and U.S. wellhead spot prices. The results indicate that, on average, Henry Hub is a better predictor of natural gas prices with an average error of 0.23 and a standard deviation of 1.22 than STEO with an average error of -0.52 and a standard deviation of 1.36. This analysis suggests that as the futures market continues to report longer forward prices (currently out to five years), it may be of interest to economic modelers to compare the accuracy of their models to the futures market. The authors would especially like to thank Doug Hale of the Energy Information Administration for supporting and reviewing this work.

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  • Journal Name: Energy Policy; Journal Volume: 34; Journal Issue: 18; Related Information: Journal Publication Date: 12/2006

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  • Report No.: LBNL--58008
  • Grant Number: DE-AC02-05CH11231
  • Office of Scientific & Technical Information Report Number: 908487
  • Archival Resource Key: ark:/67531/metadc881386

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  • June 30, 2005

Added to The UNT Digital Library

  • Sept. 22, 2016, 2:13 a.m.

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  • Sept. 29, 2016, 7:45 p.m.

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Wong-Parodi, Gabrielle; Dale, Larry & Lekov, Alex. Comparing Price Forecast Accuracy of Natural Gas Models andFutures Markets, article, June 30, 2005; Berkeley, California. (digital.library.unt.edu/ark:/67531/metadc881386/: accessed September 24, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.