This book describes in an informal manner the methods used by consultants and industry planners to compile long term forecasts of global energy demand, supply and prices. A core aim is to expose the frailties of the forecasting process and describe the myriad issues that have to be addressed to compile such projections.
The book shows that long term energy forecasts are often proven to be wide of the mark; but emphasises that forecasts are still needed, notwithstanding their accuracy. A market view is inevitably required to underpin ongoing new energy investment projects. The value of forecasts is generated in understanding their construction - how you get to the number - and being able to challenge their methodologies and assumptions.
Forecasting agencies naturally seek to convey rigour, objectivity, accuracy and sophisticated modelling. But users' minds need to be open to the reality that the process has many weaknesses. Users should be aware of the huge pressure on analysts to follow the herd instinct, the massive scope to make totally justifiable varying assumptions with significant impact on results, forecasts reflecting the prejudices of the compiler and projections being derailed by unforecastable economic and political externalities. At many points in the process the forecasted, contrary to the general perception that the task involves objective statistical analysis to derive a conclusion, in fact involves the forecaster in establishing a story to communicate, and then bending the numbers to support that view.
For the corporate planning and financing sectors, particularly those relying on forecasts to make trading and investment decisions, the book thus aims to increase awareness of the forecasting risks and the often 'smoke and mirrors' nature of the exercise.