Publications: The Petroleum Economics Monthly

Bad Data Can Lead to Bad Financial Outcomes (July 2016)

Today accurate data are essential to proper decision-making. As the value of correct information has increased, entrepreneurs have rushed to offer specialized services. In agriculture, companies hire planes to fly over fields and gauge crop yield. In oil, firms like Genscape use infrared cameras to check crude oil levels in storage tanks. It is government agencies, though, rather than private firms that have been and still are the primary source of key economic data. This is because they can command submissions. In some cases, especially tax collection, governments demand data from all parties. In other cases, agencies design voluntary statistical surveys to gather information.

Unfortunately, the information quality achieved by government agencies varies. Some go to great lengths to provide timely, accurate data. Others do not. Some work continually to improve and update information submitted. Others do not. Some work aggressively to explain changes in data quality and methodologies. Others do not. Some work diligently to produce a single uniform set of statistical measures. Others do not. This issue of The Petroleum Economics Monthly examines the collection and dissemination of economic data by reliable statistical agencies and then compares their efforts to those of the EIA. We next suggest ways in which the EIA can improve its data. Finally, we estimate and present the cost of the EIA’s errors in 2016. Specifically, over the summer of 2016 the EIA cost to those marketing gasoline was around $10 billion, with much of that expense being passed on to shareholders in the form of lower share prices.