Moving forward EIA must also assess other influences, such as speculation, hedging, investment, and exchange rates
- By Mark McFadden -
EIA's new Administrator, Dr. Richard Newell, has launched an Energy and Financial Markets Initiative to improve understanding and analysis of what drives energy prices.
"EIA's traditional coverage of 'fundamentals' such as energy consumption, production, inventories, spare production capacity, and geopolitical risks is essential, but moving forward EIA must also assess other influences, such as speculation, hedging, investment, and exchange rates, as we seek to fully understand energy price movements," stated Dr. Newell. "The initiative I am launching today will help improve energy market transparency, support sound policy and efficient markets, and increase public understanding-activities that are central to EIA's mission."
Dr. Newell has formed an Energy and Financial Markets Analysis Team to supplement EIA's strength in fundamentals analysis and serve as the focal point for activities under the Initiative.
Key actions are already planned in four main areas:
(1) Collection of critical information on factors affecting energy prices; (2) Analysis through in-depth studies of energy market behavior; (3) Outreach to solicit feedback from a broad range of experts on the interrelationship of energy and financial markets; and (4) Coordination with other Federal agencies engaged in energy market information collection and analysis.
Collection of Critical Energy Information to Improve Market Transparency
* EIA already collects significant energy information, but
additional data would further improve market transparency.
By November 2009, EIA will publish a Federal Register notice
seeking input to identify the best data for understanding
relationships among physical inventories, prices, and market
activity. In addition, EIA will expand its collection of
commercial oil and refined products storage capacity data
beginning in early 2010 (EIA already tracks natural gas storage
capacity). Similar data collections were specified in the
American Clean Energy Leadership Act of 2009 (S. 1462), adopted
earlier this year by the Senate Committee on Energy and Natural
Resources.
* EIA will seek market data from other Federal agencies, including
from the Commodity Futures Trading Commission, to analyze the
influence of futures and related financial market activity on
energy prices in the context of other energy market factors.
* Over the next year, EIA will provide a comprehensive assessment
of remaining energy information gaps in physical and financial
markets, and it will develop a strategy to obtain the necessary
data.
* By October 2009, EIA will publish its semi-annual report, Market
Assessment of Planned Refinery Outages, which will identify
regions where planned refinery outages may affect supply and
prices this winter. In November, EIA will publish its assessment
of the need to collect any additional data in the future to examine
the impacts of planned refinery outages.
Analysis of Energy and Financial Market Dynamics
* EIA will develop analytical reports that identify the many factors
potentially influencing oil and other energy prices-including
consumption, production, inventories, spare production capacity,
geopolitical risks, speculation, hedging, investment, and exchange
rates-and describe the relationship of these factors to prices, the
timeframes over which these relationships tend to hold, and the
mechanisms underlying them. Initial analysis will pay particular
attention to the recent period of price volatility and will be the
starting point for identifying gaps in information and analysis,
which will form the basis of EIA's longer-term analytic agenda.
* Beginning in October 2009, EIA's short-term crude oil and natural
gas price forecasts will better reflect the volatility and uncertainty
surrounding these prices. The "Short-Term Energy Outlook" will publish
a quantitative measure of price uncertainty in the form of confidence
intervals around crude oil and natural gas futures prices, based on
information from futures and options markets.
Outreach to Experts and the Public
* EIA will establish a panel of experts from industry, financial
institutions, and academia to review and provide independent advice
on reports, analyses, and other products developed under the Energy
and Financial Markets Initiative.
* EIA will host workshops to discuss its analyses, seek input on future
analyses, clarify information gaps, and identify products EIA could
provide to increase transparency, market efficiency, and understanding of energy markets.
Coordination with Other Federal Agencies
* EIA will seek to improve its information and analyses through input
from other Federal agencies, including the Commodity Futures Trading
Commission, the Department of the Treasury, the Federal Energy
Regulatory Commission, the Federal Reserve, the Federal Trade Commission,
the Securities and Exchange Commission, and other offices in the
Department of Energy.
Founded in 1977, EIA is charged by Congress and the President to collect, analyze, coordinate, and disseminate energy information to promote sound policy making, efficient markets, and public understanding of energy and its interaction with the economy.
Dr. Richard G. Newell was sworn in on August 3, 2009, as EIA's new Administrator. For biographical information visit http://tonto.eia.doe.gov/abouteia/richard_newell.cfm.