Oil projections in retrospect: Revisions, accuracy and current uncertainty

Abstract

Scenarios and projections are important for decision and policy making. Accuracy of past projections can be useful for both scenario users and developers, for insight on current projection uncertainty, and for guiding improvement efforts. This paper compiles projections of oil production, oil prices and upstream investments from the years 2000 to 2016 from the annual World Energy Outlook by the International Energy Agency, and investigates revisions and accuracy of past projections and implied uncertainty of current ones. Revisions of world oil production, price and investments have been motivated by a combination of demand and supply factors. Downward revisions are mainly allocated to OPEC, while recent upward revisions are due to unconventional oil, in particular US tight oil. Non-OPEC conventional projections have been stable. Price and investments have been revised mostly upwards. Projection accuracy follows the size and directions of these revisions, with high accuracy for Non-OPEC (mean absolute percentage error of 4.8% on a 5 year horizon) and low for OPEC (8.9%) and unconventional (37%). Counteracting error directions contribute to accurate total World oil supply projections (4%) while price projections have low accuracy (37%). Scenario users should be aware of implied uncertainty of current oil projections. In planning and decision making, uncertainty ranges such as those presented here can be used as benchmarks. Scenario developers should focus improvements efforts on three areas in particular: tight oil, OPEC and new technology.