DOE Documents Say EIA reports Bogus Data

The U.S. government methodology for measuring oil inventory is broken, according to internal documents obtained from the Department of Energy (DOE), creating skepticism among traders and adversely affecting producers and production levels.

Documents obtained through a Freedom of Information Act request strongly suggest multiple errors in the way oil inventories are calculated and reported by the Energy Information Agency’s (EIA) weekly oil report.� One instance of bogus data reported in September caused a spike in prices throughout the energy complex.� Old technology and inferior methodology caused compilers no reasonable means for verifying the accuracy of the data.� Potential security breaches were revealed in the documents as well.

In addition, the documents also suggest various problems with firms that self-report.

According to internal emails obtained from the DOE, the process, by which, the EIA gathered, complied and reported the data is failed.� Since 1983, complexities of the oil industry infrastructure and the importance of the data have increased markedly.

As far back as 1983, the EIA has released oil and other fossil fuels inventory data each Wednesday at 10:30 a.m. EST, creating many volatile days in the futures market.

The methodology and internal systems at the EIA have not been updated for 30 years, according to consulting firm SAIC Inc. One report said that human error regarding hand-entering data casts doubt on the effectiveness of the EIA to provide this �critical� data, said Stephen Harvey, director of the EIA.

“Should you be concerned? Yes. Is it as good as we’d like it to be? No. Is it better or worse than some other countries where we’d like to know this information? It’s probably a whole lot better,” Harvey said.

An instance of misreporting came in September when the EIA released data showing a huge drop of four million barrels for the week of September 16, seemingly disappearing from the Cushing storage facility in Oklahoma.� Since Cushing is the most important and well-respected facility in the United States, investors drove the previous day’s spot oil price higher by 2.2 percent following the news.

Traders and industry players regard the EIA data with skepticism.

“The EIA data is very important to us,” said Francisco Blanch, an oil analyst with Bank of America Merrill Lynch. “If this data was called into question, it would obviously limit the validity of some of our analysis, particularly as it relates to the U.S. market.”