Reuters logo
COLUMN-U.S. set to get more accurate oil production data: Kemp
May 13, 2015 / 9:42 AM / 3 years ago

COLUMN-U.S. set to get more accurate oil production data: Kemp

(John Kemp is a Reuters market analyst. The views expressed are his own)

By John Kemp

LONDON, May 13 (Reuters) - Figures on U.S. oil production are subject to much more uncertainty than the numbers for oil stocks, refinery throughput and imports because the Energy Information Administration (EIA) has to rely on state-level data rather than its own surveys.

That could be about to change, however, because the EIA has received approval from the White House to launch its own mandatory monthly survey of oil and condensate production.

The first of the new survey forms have gone out and respondents are beginning to submit data. It will take a few months for the agency to vet the results for quality but the first survey figures could be published in the next few months.

DATA COLLECTION

All the information that the EIA currently collects and publishes on U.S. oil refining, stocks, natural gas, pipelines, and other energy markets stems from the oil crisis in 1973/74.

The Federal Energy Administration (FEA) Act, which established the forerunner of the EIA, became law in May 1974, when the United States was still gripped by a sense of crisis over energy shortages caused by the Arab oil embargo.

The law granted sweeping powers to the FEA including the authority to “collect, assemble, evaluate and analyze energy information” to permit monitoring and the formulation of policy (PL 93-275).

Section 13(b) states: “All persons owning or operating facilities or business premises who are engaged in any phase of energy supply or major energy consumption shall make available to the administrator such information and periodic reports, records, documents, and other data ... as the administrator may prescribe by regulation or order.”

The crisis of 1973/74 had taken a complacent public and politicians by surprise, even though the root causes of the shortages long predated the embargo. Many Americans blamed soaring prices on a perceived conspiracy among the big oil and gas companies to withhold supply from the markets.

“The news media embraced drama rather than facts, and Congress was dismayed to find that the federal government had no independent source of data as a check on the oil industry,” Richard Vietor of Harvard Business School wrote later (“Energy Policy in America Since 1945”, 1984).

The FEA’s information-collection powers were designed to give the federal government its own comprehensive information on the state of energy production and markets.

But the sweeping powers generated an inevitable reaction, especially from small, independent oil and gas producers. In 1976, Congress approved the Federal Energy Administration Act Amendments to curb some of the FEA’s authority.

The amending legislation included a new Section 13(h), which stipulated that “the administrator shall take into account the size of businesses required to submit reports with the administrator so as to avoid, to the greatest extent practicable, overly burdensome reporting requirements on small marketers and distributors of petroleum products and other small business concerns”.

FORM FILLING

The legislative history of the information-gathering powers highlights the central tension in accurately measuring energy supply, demand and stockpiles. Truly comprehensive information would require a blizzard of form filling and prompt fierce protests about the burden on respondents.

Like other agencies, such as the Census Bureau, the Bureau of Economic Analysis and the Bureau of Labor Statistics, the EIA relies on sampling and hopes that careful survey design will ensure the sample is representative of the much bigger universe of oil and gas producers, marketers, refiners and pipeline companies while minimising the reporting burden on smaller companies.

Sampling tends to concentrate on larger businesses that account for most oil and gas production, refining, storage and consumption, and have the resources to fill in the forms without too much effort.

Surveys work well for oil refining and imports because there are fewer than 150 refineries in the United States (and many companies own more than one refinery). The number of oil importers and stockholders is not much higher. So surveying oil imports, refinery throughput and stock levels is comparatively straightforward.

There are many more oil and gas producers: around 13,000 well operators, according to the Independent Petroleum Association of America. The bulk of oil and gas production comes from a small number of big operators, with the rest produced by a multitude of small firms, who fiercely dislike federal bureaucracy.

STATE RECORDS

Below the federal level, every state requires well operators to file production records so that taxes can be assessed and the well regulated properly. The EIA has relied on these records to compile its own estimates of national oil production without conducting its own survey.

The problem is these records are finalised with a long delay. “Over the past 26 months, final crude oil production for the 19 states and the Gulf of Mexico was reported, on average, more than nine months after the end of a month,” the EIA explained in a briefing to trade associations in July 2014.

Texas, which accounts for more than one-third of national production, takes on average 29 months to finalise its output numbers, and production typically increases 40 percent between the volume initially reported and the final figure.

Long delays in collecting state data did not cause major estimating errors in the late 1990s and early 2000s, when nationwide production was declining but only very slowly, and did not change much from one month or one year to the next.

But since 2008, national output has risen and been changing much more rapidly, and the data-collection delays are causing major estimation problems. The EIA has responded with plans to launch its own monthly survey of oil and condensate production.

FORM EIA-914

The EIA already collects data on natural gas production on a monthly basis via Form EIA-914, sent to a sample of about 240 well operators.

The agency has proposed increasing the scope of Form EIA-914 to expand the coverage of gas production from six to 14 more states/areas and to include oil production in 20 states/areas for the first time. The EIA will also ask respondents about the gravity of the oil they produce.

The EIA estimates it can achieve 85 percent coverage of oil and gas production by sending survey forms to fewer than 600 respondents each month, which is a relatively small number compared with the more than 13,000 well operators.

Oil and gas producers would have 40 days from the end of the reporting month in which to file their production data.

The annual cost to the federal government of administering the enhanced programme is estimated at under $1 million, while the EIA estimates it will take each respondent four hours per month to collect the information, fill in and file the forms. (Editing by Dale Hudson)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below