With Fuel Prices, Gov't Errs on Optimistic Side

That's an actual quote from the AP story on the projected gas price peak in the P-I this morning: "the government tends to err on the optimistic side."

The optimism arrives via Guy Caruso, head of the Energy Information Administration, who said at a congressional hearing that gasoline prices should crest at $4.15 per gallon this summer. But here's the thing: based on his performance, Caruso should be lobbying to change his department's name to the Energy Misinformation Administration:

"They usually dramatically underestimate the cost," said Eli Hopson of the Union of Concerned Scientists, which has examined annual EIA price projections going back to 2003. Each year the average price predictions were understated by 36 to 80 cents a gallon, said Hopson.

That's putting it kindly. Over at Seattle's Sightline blog, Eric de Place can't restrain himself:

...the EIA has a hilarious record of forecasting world oil prices. And even when it comes to domestic gasoline prices, it's as if their forecasts are completely impervious to reality. To wit:

* In February, the EIA forecast that prices would peak at $3.40 in the spring.
* In March, they forecast that prices would peak at $3.50 in the spring.
* In April, they forecast that gas prices would peak at $3.60 in the spring.
* By early May, prices were at $3.57 and climbing, so the new official projection said that prices would peak this month, in June, at $3.73.
* By late May -- just weeks after the new forecast -- the average price was already at $3.94. And yesterday's national average gasoline price was $4.04. So now they're saying that prices will peak in August, at $4.15.

Sightline's Clark Williams-Derry also points out that worldwide production of oil may have actually fallen last year. If so, the EIA's wrong-way optimism is even more striking (but you know, less so against the backdrop of the Bush administration as a whole).

We're worried about this optimism brand of stupid being contagious: whoever does the fuel projections at Metro banked on diesel topping out at $2.60/gallon this year. Diesel is now over $4/gallon, and, facing a $33 million fuel budget deficit over this year and the next, Metro general manager Kevin Desmond has been testing the waters ("all the other agencies are doing it") about a second bus fare hike.

The County Council is pushing back on that, but you do start to wonder what you have to do to lose a job as a forecaster. How much of $33 million would it have been worth to have found someone willing to hedge against a "worse case" scenario?

Incredibly topical photo courtesy of Seattlest Flickr poolster prima seadiva. Thanks for anticipating our gas prices story for us!