bluuebunny/crossref_metadata_2025 huggingface dataset:
Multiple Energy Supply Risks, Optimal Reserves, and Optimal Domestic Production Capacities
Authors: Zweifel Peter , Ferrari Matteo
Published: May 2011

This study starts from the observation that today’s Western trading nations are exposed to multiple risks of energy supplies, e.g. simultaneous shortage of oil and electricity supplies. To cope with these risks, oil can be stockpiled as well as domestic capacity for power production built up. Adopting the viewpoint of a policy maker who aims at minimizing the expected cost of security of supply, optimal simultaneous adjustments of oil stocks and electric production capacities to exogenous changes such as economic growth are derived. Against this benchmark, one-dimensional rules such as “oil reserves for 90 days” turn out to be not only suboptimal but also to foster adjustments that exacerbate suboptimality.
Energy Demand with the Flexible Double-Logarithmic Functional Form
Authors: Nan Gehuang D. , Murry Donald A.
Published: May 2011

A flexible double-logarithmic function form is developed to meet assumptions of consumer behavior. Then annual residential and commercial data (1970-87) are applied to this functional form to examine demand for petroleum products, electricity, and natural gas in California. The traditional double log-linear functional form has shortcomings of constant elasticities. The regression equations in this study, with varied estimated elasticities, overcome some of these shortcomings. All short-run own-price elasticities are inelastic and all income elasticities are close to unity in this study. According to the short-run time-trend elasticities, consumers ‘fuelpreference in California is electricity. The long-run income elasticities also indicate that the residential consumers will consume more electricity and natural gas as their energy budgets increase in the long run.
Adjustment Costs and Returns to Scale: Some Theoretical and Empirical Aspects
Authors: Campbell Watkins G.
Published: May 2011

In specifying third generation models of factor demands, adjustment costs are frequently treated as a function of net rather than gross investment. Such specifications assume replacement investment is frictionless and in equilibrium adjustment costs are zero. Recognition that adjustment costs may reflect not only net but also gross investment leads to a more complex model. But the revised model implies increasing long-run average costs. Such a model can still be specified to impose constant long-run average costs, or constant returns to scale. The latter condition is often desirable to avoid confusion in estimating technological progress. However, empirical work suggests that conventionally labelled expressions of adjustment costs embrace other influences. Proper measurement and identification of such costs may well require more finely tuned approaches.
An Analysis of the Macro-Economic Costs of Various CO2 Emission Control Policies in Japan
Authors: Goto Noriyuki , Sawa Takamitsu
Published: May 2011

This study attempts quantitative and comparative analyses of the expected macro-economic impacts of various carbon dioxide (CO2) emission control policies. The analytical tool is a long-term general equilibrium model that integrates the behaviors of competitive energy sectors with macro-economic activity. We find that, if the economy adjusts efficiently, the macro-economic costs incurred by CO2 emission controls are not very large. For example, the cost is estimated to be less than 0.5% of GNP on average during the next 50 years to freeze the annual rate of CO2 emissions at the 1990’s level. It is also shown that, among various types of control policies, the introduction of a carbon tax is the most effective method to achieve a proposed target.
The Impact of Energy Prices on Technology Choice in the United States Steel Industry
Authors: Boyd Gale A. , Karlson Stephen H.
Published: May 2011

In the last 30 years, U. S. steel producers have replaced their aging open hearth steel furnaces with basic oxygen (BOF) or large electric arc furnaces (LEF). This choice of technology creates the opportunity to substitute electricity for fossil fuels. We extend earlier research to investigate whether energy prices affect this type of technology adoption. The econometric model uses the “seemingly unrelated Tobit” method to capture the effects of the industry’s experience with both technologies, technical change, and potential cost reductions, as well as energy prices, on adoption. When we include the prices of electricity and coking coal as explanatory variables, the four energy price coefficients have the signs predicted by the law of demand, but the magnitude of the coefficients is such that the non-price terms are more important, e.g. a 50% increase in electricity prices would delay LEF adoption by only 12 days. Our results suggest that the adoption of LEF represents a form of major process technical change (factor biased - electricity using), rather than a price-induced technological innovation.
How Big is the Electricity Conservation Potential in Industry?
Authors: Jaccard Mark , Nyboer John , Fogwill Allan
Published: May 2011

For integrated resource planning, electric utilities require estimates of the technical and economic conservation potential. This potential depends upon the efficiencies of existing equipment, as well as efficiencies and costs of new equipment. The industrial conservation potential is generally concentrated in machine drive: electric motors and the various auxiliary technologies (pumps, fans, etc.) and process technologies (grinders, saws, etc.) to which they are connected. Most studies of industry focus on the potential due to more efficient motors and electronic adjustable speed drives. Our study of industry in British Columbia extends this analysis in two ways: (1) Alternative configurations and equipment types of key auxiliary and process equipment and connecting mechanisms are included in the database and analysis. (2) The relationship is specified between different auxiliary technologies and major steps in each production process. This allows for a more complete and dynamic estimate of conservation potential, showing how it changes as a function of structural and major process change in industry. The resulting industry-wide estimates of technical and economic conservation potential range from 35% to 40%, in the year 2010, with significant differences between end-uses (15% to 70%) and between industry branches (20% to 42%).
The Effects of NAFTA on the Environment
Authors: Kaufmann Robert K. , Pauly Peter , Sweitzer Julie
Published: May 2011

This paper reviews the impacts of NAFTA on the environment. Discussion focuses on the degree to which economic conditions in Canada, Mexico, and United States are consistent with the assumptions on which the benefits of free trade are based. Specifically, we discuss how NAFTA may exacerbate or alleviate the environmental impacts of economic activity via environmental externalities, the rate and efficiency of resource extraction, increased income, increased trade and transportation, and harmonizing environmental policy among nations at different levels of economic development. Because of difficulties in comparing different types of environmental impacts, we do not offer a conclusion about the overall effect of NAFTA on the environment, positive or negative. Rather, we argue that NAFTA must preserve the rights of all affected parties to intervene so that the costs and benefits associated with a particular project that arises out of increased trade can be evaluated on a case by case basis in the same imperfect way that such issues are addressed within the confines of a single nation.
Mexico’s Economic Reform: Energy and the Constitution
Authors: Rubio Luis
Published: May 2011

Oil is a fundamental component of nationhood in Mexico. The 1938 expropriation of oil resources concluded a process of internal political consolidation and thus became the most important symbol of nationalism. Mexico has been undergoing a process of economic reform that has altered the country’s economic structure and has subjected it to international competition. Oil in particular and energy in general have been left untouched. There is recognition that without an equal reform of the energy industry, the potential for success will be significantly limited. While the Constitution allows private investment in the industry—with the exception of the resource properties themselves—the Regulatory Law bans any private participation. Because of its political sensitivity, however, amending the law in order to reform the oil industry will necessitate a domestic initiative rather than foreign pressure. In this perspective, NAFTA served to slow and postpone the reform of the industry, rather than the opposite. Once NAFTA is well in place, the industry will have to face competition.
Natural Gas Trade in North America: Building up to the NAFTA
Authors: Plourde André
Published: May 2011

This paper traces the evolution of natural gas trade among Canada, Mexico, and the United States in the 1967-1992 period. In addition, the provisions of the North American Free Trade Agreement (NAFTA) that relate to natural gas trade are examined in the light of the corresponding aspects of the Canada-United States Free Trade Agreement (FTA). One of the main conclusions to emerge is that exports from Canada to the United States would likely continue to dominate North American natural gas trade patterns under the NAFTA. Past experience suggests that regulatory policies play a crucial role in determining trade patterns. In the case of Canada and the United States, the policies of deregulation implemented by the two countries prior to 1989 have proven to be much more important than has the FTA in encouraging cross-border trade in natural gas. Since the NAFTA allows Mexico to maintain a highly interventionist approach to energy policy, an internally-driven process of policy change will be required to liberalize natural gas trade between Mexico and the other parties to the Agreement. A few specific developments relating to natural gas trade among the NAFTA parties are also examined in the light of the Agreement.
North American Free Trade: Another Challenge to Coal
Authors: Gordon Richard L.
Published: May 2011

Since trade in coal between the United States and Canada was never restricted and since the prospects for U.S.-Mexican coal trade are small, any effects of NAFTA will be indirect. Changes in gas and electricity trade might arise. The uncertainties are such that even the direction of the indirect impacts is unclear. Thus, it would be folly to predict the magnitudes. NAFTA then may prove the smallest of many disruptive influences acting on coal markets.
The Mexican Petrochemical Sector in the NAFTA Negotiations
Authors: Kessel Georgina , Kim Chong-Sup
Published: May 2011

Since 1985, there have been important changes in the Mexican petrochemical sector, including trade liberalization, deregulation and the elimination of subsidies. NAFTA represents another step towards liberalization of the sector. Given the low tariffs currently applied to international trade among the three nations, we do not anticipate major impacts of NAFTA on trade flows. Nevertheless, the elimination of restrictions to foreign investment is expected to increase capital flows into the sector and to promote productivity increases. On the other hand, the new barriers to trade in petrochemical feedstocks and the restrictions on private investment in infrastructure may negatively affect the sector’s growth, making it necessary to adjust domestic regulations to improve the performance of Pemex.
Deregulation and Common Carriage in the Nordic Power System
Authors: Bjorvatn Kjetil , Tj Sigveøtta
Published: May 2011

In this paper we analyze deregulation and integration of the Nordic markets for electric power. Nordic trade in electricity is controlled by national monopolies and is confined to occasional power. No transit is allowed. Due to its central location, Sweden plays a crucial role in the Nordic electricity market. For Sweden, common carriage without some form of compensation is not likely to be an acceptable form of integration. The Shapley values reveal that compensatory demands are likely to be quite large—a fact which might complicate negotiations on the introduction of common carriage. An alternative to common carriage would be for Sweden to exert market power through monopolistic pricing of its transmission services. Government involvement may be necessary to secure a successful integration of international electricity markets.
Another Look at U.S. Passenger Vehicle Use and the ‘Rebound’ Effect from Improved Fuel Efficiency
Authors: Jones Clifton T.
Published: May 2011

Recently, Greene (1992) analyzed vehicle miles travelled for U.S. passenger vehicles over 1966-89 to econometrically estimate the “rebound” effect in fuel consumption resulting from improved fuel efficiency. He found that a static AR(1) model could not be rejected, implying that the rebound effect is small (13 %) with no significant long-run adjustments, regardless of the assumed functional form (linear or loglinear). Another look at the data from a different model selection approach shows that while a loglinear AR(1) model is acceptable, the linear version is not. Using either form, a lagged dependent variable model cannot be rejected on statistical grounds yet has insignificant GNP effects, yielding similarly small short-run rebound effects but significant long-run rebound effects of about 30%. Thus, the evidence from these competing models for a significant long-run adjustment process is mixed, so that its presence cannot be completely ruled out.
The Costs of Stabilizing Global C02 Emissions: A Probabilistic Analysis Based on Expert Judgments*
Authors: Manne Alan S. , Richels Richard G.
Published: May 2011

In this paper, we examine the economic costs of stabilizing global C02 emissions at 1990 levels. Previous analyses of the costs of emissions abatement have tended to be deterministic. That is, no attempt was made to assign probabilities to various scenarios. Policy-makers need information both on the range of possible outcomes and on their relative likelihood. We use a probability poll to characterize the uncertainty surrounding critical parameters and to construct probability distributions over the outcomes of interest. The analysis suggests a wide range for abatement costs. In order to stabilize global emissions, the annual price tag lies between 0.2 and 6.8 percent of gross world product. This distribution is highly skewed. The expected costs are approximately 1.5 percent.
A Climate Treaty and the Norwegian Economy: A CGE Assessment
Authors: Brendemoen Anne , Vennemo Haakon
Published: May 2011

This paper examines the impact of an international climate treaty on a single country—Norway. A disaggregate computable general equilibrium (CGE) model is used. We discuss the treaty's effects on main macroeconomic indicators, economic growth, distributional impacts, the impact on pollutant emissions other than C02, and the secondary benefits of this reduction. The. results suggest that C02 emissions will decrease compared to the current level. The distributional impacts are modest. Increases in secondary benefits recoup almost one half of the loss in private consumption. We characterize the uncertainty of this estimate.
Weighting Nonrandom Samples in Voluntary Energy Conservation Program Evaluation*
Authors: Ozog Michael T. , Waldman Donald M.
Published: May 2011

In this paper we examine the endogenous stratification problem in the evaluation of DSM programs and determine the appropriate weighting necessary for consistent estimation. Both the complexity and number of alternative DSM programs create the need for a cartful statement of the problems and solutions. We examine two commonly occurring evaluation situations: pure participation models and models of net conservation. A hypothetical numerical example is presented to help elucidate the concepts, and data from a DSM program sponsored by a large U.S. utility is used to examine the effect of weighting. In both hypothetical and actual DSM programs, severe biases resulted when unweighted data was used.
Gasoline Demand in Developing Asian Countries*
Authors: McRae Robert
Published: May 2011

This paper presents econometric estimates of motor gasoline demand in eleven developing countries of Asia. The price and GDP per capita elasticities are estimated for each country separately, and for several pooled combinations of the countries. The estimated elasticities for the Asian countries are compared with those of the OECD countries. Generally, one finds that the OECD countries have GDP elasticities that are smaller, and price elasticities that are larger (in absolute value). The price elasticities for the low-income Asian countries are more inelastic than for the middle-income Asian countries, and the GDP elasticities are generally more elastic.
Emission Trading with Shares and Coupons: A Laboratory Experiment
Authors: Muller R. Andrew , Mestelman Stuart
Published: May 2011

Increasing attention is being paid to emission trading programs for the control of air and water pollution. The United States EPA has implemented a tradable emission allowance program for sulphur oxides. The EPA auction has been investigated in the laboratory by Cronshaw and Brown Kruse and by Franciosi, Isaac, Pingry and Reynolds. A somewhat different proposal has been made for controlling nitrous oxides in southern Ontario. Trade would occur in coupons (emission permits) and shares (entitlements to coupons). This paper reports a laboratory investigation of the Canadian proposal in which the experimental design developed by Cronshaw and Brown Kruse was modified to reflect the proposed Canadian institution. The results indicate dispersed but relatively stable prices, higher efficiency than obtained in related experiments modelling the EPA plan, and little arbitrage between share and coupon prices. The results could be due to differences in the market institutions or the training of subjects.
Estimating Consumer Energy Demand Using International Data: Theoretical and Policy Implications*
Authors: Rothman Dale S. , Hong J.Ho , Mount Timothy D.
Published: May 2011

In this paper, consumer energy demand is estimated as part of a complete demand system using a consistent set of international data on prices and expenditures for 53 countries ranging from the poorest to the wealthiest. We compare three models: the Translog, the Deaton-Muellbauer Almost Ideal Demand System (DM), and the Generalized Logit (Logit), and two levels of commodity aggregation (6-good and 9-good). The estimation results indicate that the model specification and level of aggregation are important. The Logit model performs better than the Translog and D-M models which provide illogical elasticity estimates for many countries. The 9-good model shows that the demand for electricity is significantly more price and income elastic than the demand for primary energy.
Residential Energy Demand and the Taxation of Housing*
Authors: Gentry William M.
Published: May 2011

This paper examines how the favorable tax treatment of housing capital in the U.S. affects the demand for residential energy. Relative to a tax system that is neutral between different investments, the current taxation of housing lowers the cost of housing capital by 23%. The tax subsidy for housing capital increases the demand for housing services and the concomitant energy demand and creates an incentive for the substitution of capital for energy in the production of housing services. Eliminating this tax subsidy for housing would lower the demand for housing services by 11.8% and residential energy demand by 6.8%. Alternatively, the same reduction in residential energy demand could be obtained through a 20% tax on residential energy.
Emerging Environmental Markets: Improving the Competitiveness of Natural Gas*
Authors: Chermak Janie M.
Published: May 2011

Current U.S. regulations focus on market approaches to reduce S02, NOx, and C02 pollution, allowing affected firms to choose the least-cost compliance alternative. Natural gas, a relatively benign fuel from an environmental perspective, could realize a substantial increase in demand if it is competitive. The viability of gas as an alternative has been questioned due to high forecast price and unstable supply. This paper assesses potential efficiency gains in the completion and production of natural gas wells which may lower production costs and increase recoverable reserves. Coupled with the premium that can be paid for its environmentally desirable qualities, gas can potentially be a feasible alternative. However, the window of opportunity is limited, because many industries, such as electric power generation, require decisions involving up-front capital expenditures that lock the firm into a specific compliance mechanism and fuel.
Import Policy Effects on the Optimal Oil Price*
Authors: Suranovic Steven M.
Published: May 2011

A steady increase in oil imports leaves oil importing countries increasingly vulnerable to future oil price shocks. Using a variation of the U.S. ElA's oil market simulation model, equilibria displaying multiple price shocks is derived endogenously as a result of optimizing behavior on the part of OPEC. Here we investigate the effects that an oil import tariff and a petroleum stock release policy may have on an OPEC optimal price path. It is shown that while both policies can reduce the magnitude of future price shocks neither may be politically or technically feasible.
Who Pays Broad-Based Energy Taxes? Computing Lifetime and Regional Incidence*
Authors: Bull Nicholas , Hassett Kevin A. , Metcalf Gilbert E.
Published: May 2011

This paper measures the incidence of energy taxes using a lifetime framework to study both a Btu tax and a carbon tax. It takes into account two key facts. First, because energy taxes have different incidence effects across the life cycle, it is important to measure the burden of taxes in terms of lifetime incidence, not just their burden in a given year. To take account of lifetime incidence, we introduce an estimation methodology for lifetime-correction as well as showing current consumption measures. Second, energy taxes have a total effect that combines both direct and indirect effects: in addition to directly increasing the price of energy goods, energy taxes also indirectly increase the price of all other goods in proportion to the energy used to produce them. We provide incidence estimates by income group and by geographical region.
Structural Changes and Energy Consumption in the Japanese Economy 1975-85: An Iput-Output Analysis*
Authors: Han Xiaoli , Lakshmanan T.K.
Published: May 2011

This paper analyzes the effects of the pervasive structural changes in the Japanese economy on its energy intensity in the decade 1975-85. It advances the energy input-output (TO) structural decomposition analysis (SDA) in two ways. First, it introduces a double denominator method to relax the assumption that all electricity is derived from fossilfuels in energy I-O analysis. Second, it develops a model which identifies explicitly the effect of energy imports. The application of our model to the Japanese experience suggested that changes in final demand structure contributed more to reducing the energy intensity of the economy than the much discussed effects of changes in technology. The overall decline in the energy intensity of the economy was accompanied by drastic shifts in the fuel mix of its energy supply, in particular, a substitution of oil by natural gas.
Toward an Optimal Oil and Gas Leasing System*
Authors: Mead Walter J.
Published: May 2011

The four principal leasing systems—work program, royalty, profit share (including rent resource tax), and bonus bidding—are reviewed relative to their efficiency in maximizing and collecting the present value of economic rents. Empirical research is shown to support theoretical conclusions that the most efficient system appears to be bonus bidding, without a fixed royalty, with leases issued in perpetuity, with environmental and other regulations required to pass a benefit/cost test, and with elimination of any nationalistic or other barriers to entry.
A Dynamic Model of Industrial Energy Demand in Kenya
Authors: Hatibu Haji Semboja Haji
Published: May 2011

This paper analyses the effects of input price movements, technology changes, capacity utilization and dynamic mechanisms on energy demand structures in the Kenyan industry. This is done with the help of a variant of the second generation dynamic factor demand (econometric) model. This interrelated disequilibrium dynamic input demand econometric model is based on a long-term costfunction representing productionfunction possibilities and takes into account the asymmetry between variable inputs (electricity, other-fuels and labour) and quasi-fixed input (capital) by imposing restrictions on the adjustment process. Variations in capacity utilization and slow substitution process invoked by the relative input price movement justifies the nature of input demand disequilibrium. The model is estimated on two IS1C digit Kenyan industry time series data (1961 - 1988) using the Iterative Zellner generalized least square method.
Price Convergence Across Natural Gas Fields and City Markets*
Authors: Walls W. David
Published: May 2011

This research reports the results of cointegration tests between natural gas spot prices at various production fields, pipeline hubs, and city markets. Cointegration between prices is evidence that spatial arbitrage is enforcing the law of one price across market locations. The results show that prices at certain city markets, Chicago and to a lesser extent California, are cointegrated with prices at field markets. However, the prices at most other locations do not move in step with gas prices in the field markets. Customer access to pipeline transportation, or competitive bypass, may explain why prices at some city markets are more responsive to production field prices than others.
Fuel Efficiency and Automobile Safety: Single-Vehicle Highway Fatalities for Passenger Cars
Authors: Khazzoom J. Daniel
Published: May 2011

This paper reports the results of an effort to shed some light on the relationship that might exist between enhanced standards and single-vehicle passenger car highway fatalities. Quantification of this relationship is not an easy task. Not surprisingly, the literature on modeling the relationship between fuel economy and highway fatalities is very scant. Our analytic framework consists of two submodels: a corporate average fuel economy (CAFE) submodel and a single-vehicle highwayfatalities submodel. Some of the variables that enter the CAFE relationship affect single-vehicle fatalities, as well. The results of this study are not unequivocal in every respect. However, they indicate that enhanced standards and automobile safety need not be at odds with each other.
Cost-Effective Climate Policy in a Small Country
Authors: Hagem Cathrine
Published: May 2011

Unilateral action to curb C02 emissions in a small country or a group of countries has only a limited effect on global C02 emissions. However, it could be a first step toward a broader climate treaty. So far, unilateral commitments have been aimed at reducing national consumption of fossilfuels. A country that produces and consumes fossil fuels can also influence the global C02 emissions by reducing its production. The estimated cost of reducing national C02 emissions in Norway, through a reduction in fossilfuel consumption, is presented in a report from the Environmental Tax Committee (1992). In this paper, that cost is compared with an estimated cost of reducing fossil fuel production. The calculation reveals that it could be less costly to reduce the production than the consumption, given that the effect on global C02 emissions is identical.
The Refining Industry in The North Atlantic
Authors: Hamm Keith
Published: May 2011

By 1993, refining capacity in Western Europe and North America was about in line with demand. The massive surplus in capacity evident in the early 1980s had been eliminated by reductions in capacity and increases in demand. This rebalancing, together with changes in the structure of crude pricing have laid the basis for a more sound economic performance than has been the case hitherto. Against this background there is a substantial investment requirement in the coming years, both positive, to take account of new business opportunities, and negative, needed just to stay in business. These latter investments stem from environmental legislation, tightening the specifications required both for finished products and operations of refineries. These requirements, coming on top of the poor profit performance of the last ten years have led to continued rationalisation by the industry despite evidence of emerging bottlenecks.
World Demand for Natural Gas: History and Prospects
Authors: Radetzki Marian
Published: May 2011

This paper briefly surveys the history of natural gas use and describes the main features of current gas consumption. The share of gas in total energy consumption, and the sectoral distribution of its use in major consuming regions are discussed. The main changes in the pattern of gas consumption since 1980 are reviewed and explained. I analyze the likely implications of (a) the emergence of the combined cycle gas power generation; (b) the rising environmental premium of gas; and (c) the transformation of the West European gas market structure. The paper concludes that natural gas will substantially increase its share of global energy consumption in the next 15-20 years.
Gas Supplies for the World Market
Authors: Jensen James T.
Published: May 2011

The ability of natural gas to compete with other energy sources is increasingly favored by environmental and technological developments. From a worldwide perspective, the gas reserves needed to satisfy this growing market are large (relative to gas demand) and are growing more rapidly. However, gas, unlike oil, is expensive to transport and many of the world's present gas reserves are in deposits that are too small or too remote to be of commercial value at present price levels. As a result, much of the supply will prove difficult to deliver to the markets that most need it, and the price consequences of market growth will vary from market to market.
Oil Industry Structure and Evolving Markets
Authors: Roeber Joe
Published: May 2011

Of all the changes in the oil industry over the past 20 years, the most radical have taken place in the market, and in theformation of prices. These are both a response to and a cause of changes in industry structure. From plannable supplies at relatively stable prices, companies have had to learn to handle short-term supplies in condition of extreme volatility. Management of the resulting price risk has become a central role of the companies' supply departments, and the use of paper markets (forward, futures and derivatives) has become an integral part of price formation. It is not impossible that the changes would be reversed, if the conditions that brought them into being—surplus production and de-integrated supply structures—were reversed in conditions of scarcity, but it is highly unlikely. Far more likely, is that risk management and the use of paper markets will increase in importance.
What Does It All Mean?
Authors: Erickson Edward W.
Published: May 2011

Three hypotheses about future market balances in the world petroleum market are identified in this paper. Two are relatively benign and one is more harsh. Examination of constraints upon OPEC behavior and increasing market and policy sophistication in consuming countries suggests that some combination of the more benign hypotheses is apt to prevail.
OPEC Production: The Missing Link
Authors: Griffin James M. , Vielhaber Lawrence M.
Published: May 2011

The future of oil depends critically on the production decisions of OPEC, which in turn depend on a variety of factors internal and external to the cartel. This paper uses a simulation of the world oil market to compute the payoff to OPEC members of alternative price and production profiles, focusing on the incentives to cooperate as well as to cheat. A “tit-for-tat” strategy by the Saudis significantly reduces the incentives to cheat, but the payoff for cheating is still positive for the smaller OPEC producers. Accordingly, prices well below the cartel's joint profit maximizing level seem most likely.
Unravelling a Riddle: The Outlook for Russian Oil*
Authors: Watkins Campbell
Published: May 2011

Russia's oil output has been declining. Yet the potential for new discoveries and development remains huge. Whether these opportunities will be seized and current attrition arrested depends on the hydrocarbon sector regime now evolving. Uncertainties on legislation, jurisdictional boundaries, pricing policies and political structures make the investment climate less than benign. Such uncertainties lead to a very marked spread in expectations about future levels of Russian oil output.
Oil Production Outside OPEC and the Former Soviet Union: A Model Applied to the U.S. and U.K.*
Authors: Mitchell John V.
Published: May 2011

Oil production in the area outside OPEC and the Former Soviet Union (FSU) has grown steadily for the past 30 years. This growth is expected to continue, despite the decline in oil prices since 1985. The steady growth in production contrasts with dramatic swings in oil prices. Non-price factors such as policies, enterprise behavior, and technical phenomena are important. This article sketches a model for tracing their interaction over time. The model is tested against the very different histories of oil production in the U.S. and U.K. The main conclusion is that non-price factors are important and differ between countries: in the U.S., environmental policy, and in the U.K., tax policy have been critical in determining oil production. The model may be extended to countries dominated by state oil enterprises, which account for most of the remaining production in this area, but this would require country-by-country analysis.
Social Costing of Electricity in Maryland: Effects on Pollution, Investment, and Prices
Authors: Palmer Karen , Krupnick Alan , Dowlatabadi Hadi , Siegel Stuart
Published: May 2011

Many state public utility commissions (PUCs) have started to require electric utilities to consider environmental and other externalities in their planning processes. To date social costing has been applied exclusively to the evaluation of new sources of electricity. More comprehensive approaches to social costing would include requiring the utility to dispatch both new and existing generating units according to social cost, or requiring electricity consumers to pay a price for electricity that reflects its full social cost. Using estimates of external costs taken from the literature, this study contrasts the implications of these three different approaches for utility decision making, electricity prices, demand for electricity and other fuels and the net emissions of selected pollutants for a Maryland utility. We find that applying social costing at the investment stage only may lead to reduced investment in new resources, increased use of existing generation resources and higher emissions of key pollutants. Applying social costing to dispatch generally leads to increased levels of investment in clean technologies, lower levels of emissions and only moderate price increases. Also, social costing of electricity generally has a small impact on consumer demand for natural gas.
Cold Hands, Warm Hearth?: Climate, Net Takeback, and Household Comfort*
Authors: Schwarz Peter M. , Taylor Thomas N.
Published: May 2011

Insulation reduces marginal heating cost and may lead to a takeback effect of higher wintertime thermostat settings, with a consequent dilution of energy savings. Alternatively, additional insulation could permit a lower thermostat setting by reducing drafts and radiation while increasing moisture retention, thereby enhancing comfort. This paper evaluates thermostat net takeback, the difference between takeback and enhanced comfort. Evidence supports the existence of both effects, with net takeback at the low end of literature estimates. Net thermostat takeback is on the order of 0.05 degrees F, leading to an energy takeback that ranges from 1-3% of potential energy savings, depending on climate and house size. Other significant determinants of thermostat are heating energy price and the presence of elderly or young occupants.
An Econometric Analysis of the Market for Natural Gas Futures*
Authors: W. David Walls
Published: May 2011

This research tests a form of the efficient markets hypothesis in the, market for natural gas futures. Unlike other studies of futures markets, the test for market efficiency is conducted at numerous locations which comprise the, natural gas spot market in addition to the delivery location specified in the futures contract. Natural gas spot and futures prices are found to be nonstationary and accordingly are modeled using recently developed maximum likelihood cointegration techniques. The futures market price is found to be cointegrated with nearly all of the spot market prices across the national network of gas pipelines. The hypothesis of market efficiency can be rejected in 3 of the 13 spot markets examined.
On the Cost of Lost Production from Russian Oil Fields*
Authors: Smith James L.
Published: May 2011

Russia is now paying heavily for past mismanagement of its major oil fields. Unconventional attempts to maximize short-run extraction, neglect of routine maintenance, and shortages of critical equipment have combined to cause a steep decline in production. This study examines the scope and size of resulting economic losses using an extension of the traditional exponential decline model. Estimates derived from the model indicate that as much as 40% of the potential value of Russian oil reserves has been lost through poor management.
Regrets or No Regrets-That is the Question: Is Conservation a Costless C02 Mitigation Strategy?
Authors: Rose Adam , Lin Shih-Mo
Published: May 2011

Based on sectoral, or partial equilibrium, analyses, energy conservation has been offered as a "no regrets" COz mitigation strategy. Ours is the first study to isolate key features of conservation strategies in a general equilibrium context. The results indicate that conservation would have slightly negative effects on the U.S. economy overall, in addition to sizable negative effects on most energy industries. Thus, while conservation may be a worthy C02 mitigation strategy, it should not be oversold as costless.
Regional Limitations on the Hedging Effectiveness of Natural Gas Futures
Authors: Brinkmann Emile J. , Rabinovitch Ramon
Published: May 2011

This paper examines the extent to which limitations in the transportation system for the natural gas market in the United States narrows the effectiveness of the NYMEX natural gas future contract as a hedging instrument and why a second contract with a different delivery point was approved during 1995. We find that the NYMEX contract is an effective hedging instrument for gas sold into pipelines for consumption in southern, eastern and midwestern states, but does not provide an effective hedge for gas sold for Rocky Mountain and West Coast states.
Performance-Based Pricing for Nuclear Power Plants
Authors: Che Yeon-Koo , Rothwell Geoffrey
Published: May 2011

State public utility commissions in the United States have implemented incentive regulations to promote the operating efficiency of nuclear power plants. This paper surveys these incentive programs .focusing on the performance-based pricing approach. Ourfindings suggest that the performance-based price should be set between the electric utility's avoided cost and the marginal cost of generating electricity at the nuclear power plant.
The Economics of Conserved-Energy "Supply" Curves*
Authors: Stoft Steven E.
Published: May 2011

This paper develops the theoretical underpinnings of conservation "supply " curves (CSCs), and in doing so uncovers several problems with current procedures for their construction. The CSC is shown to be derivable from a production isoquant, and not to be a true supply curve. The traditional algorithm for constructing a CSC from discrete measures is shown to be suboptimal, contrary to prior claims. Omitting conservation measuresfrom consideration can lead to systematic, excessive conservation. The CSC concept is extended from constant-service to constant-utility measures, and an improved approximation is suggested for the cost of conserved energy (CCE) of measures that cause rebound. The appendix provides a formula for CCE that is simple yet more general than the one currently in use, but shows that even with this generalization, CSCs cannot be constructed for a world with fluctuating energy prices.
Preserving Natural Environments on Coal Lands at Minimum Cost
Authors: Watson William D.
Published: May 2011

In the U.S., about 67 billion tons of coal (27% of the nation's surface minable coal) have been placed off-limits to surface mining by the Federal Land Policy Management Act and other restrictions in order to protect the environment. By the year 2005, it is projected that this reduction in coal reserves will add about $500 million per year to the nation's energy costs. As set-aside costs grow and the locked-up coal is perceived as progressively more valuable over time, it is likely that pressure will be brought on the U. S. Department of the Interior to revise its resource management plans. As a general rule, a rational management objective is to achieve a given amount of environmental preservation at the lowest cost. This paper provides an analytic framework, namely constrained cost minimization, for implementing that objective. Examples are given for protecting sage grouse and eagle habitat.
Is OPEC a Cartel? Evidence from Cointegration and Causality Tests
Authors: Gülen S. Gücan
Published: May 2011

Were the energy shocks of the 1970s engineered by an effective cartel acting to share the market by controlling output and influencing oil prices? If OPEC was an effective cartel sharing the market among its members, there would be a long run relationship between each member's production and total OPEC output. One would also expect OPECs production to significantly affect the price of oil. These implications of cartel behavior are tested via cointegration and causality tests. The likely effects of regime changes are dealt with using techniques developed by Perron (1989). There is evidence of output coordination among members of the organization, especially in the output rationing era (1982-1993). This is also the only period in which the causality from OPEC production to the price of oil is statistically significant.
Social Benefits of Financial Investment Support in Energy Conservation Policy
Authors: Haugland Torleif
Published: May 2011

This paper examines the costs and benefits of a Norwegian energy conservation program that provided financial support for investments in energy efficiency. Participants in the program included industry, commerce, public services and households. Evaluation of the program shows that about 70% of the participants were "free riders' who would have invested in efficiency improvements even in the absence of the program. The economic efficiency was further reduced by economic distortions caused by taxes needed to finance the program. However, the energy savings did give environmental benefits through reduced atmospheric emissions, although this effect was somewhat diluted through a "conservation rebound," where the actual reduction in energy consumption was less than the theoretical savings. The energy conservation program is also highly sensitive to assumptions about the economic lifetime of the investments.
Market Power in a System of Tradeable CO2, Quotas
Authors: Wesrskog Hege
Published: May 2011

This paper examines the connection between market power and the size of efficiency loss in a market for tradeable CO2 permits. Countries, not firms, are the players in the market. A situation is analyzed where some of the, participants have market power, i.e., they can influence the price of a CO2 quota. Each country with market power decides how many quotas to buy or sell, given the other market power countries' sales or purchases of quotas, and the behavior of countries without market power. The latter countries act as price takers. The market equilibrium is compared to a cost effective market situation in order to quantify the efficiency loss resulting from market power.
Economic and Regulatory Factors Affecting the Maintenance of Nuclear Power Plants
Authors: Hewlett James G.
Published: May 2011

This paper examines the factors causing the escalation in the 1980s and' subsequent leveling off of nuclear power plant non-fuel Operating and Maintenance (O&M) costs. Over the period 1974-93, real (inflation-adjusted) non-fuel O&M costs escalated from about $23 to about $97 per kilowatt of installed capacity (kW). However, much of the escalation in costs occurred in the 1980s. Over the period 1975-87, real O&M costs escalated at an annual rate of about 11 percent. Since then, the annual growth rate in real O&M costs fell to about I percent. The research found that the escalation in O&M costs was primarily due to increased regulatory activity by the Nuclear Regulatory, Commission. More important, there is little evidence that the moderation in the growth in O&M costs was regulatory induced, but instead was due to changes in the economic incentives to improve plant performance.
How Many Kilowatts are in a Negawatt? Verifying Ex Post Estimates of Utility Conservation Impacts at the Regional Level
Authors: Parfomak Paul W. , Lave Lester R.
Published: May 2011

The current movement toward utility restructuring raises questions about the future of utility conservation programs, which have long suffered from illinformed and conflicting perceptions about their ability to affect customer loads. Controversy has arisen because of the inherent difficulty in measuring conservation impacts and because utilities have had clear economic incentives to overestimate impacts. This study uses econometric techniques to examine the aggregate commercial and industrial conservation impacts reported expost by 39 utilities in the Northeast U.S. and California through 1993. The study finds that 99.4% of the reported conservation impacts are statistically observable in system level sales after accounting for economic and weather effects. The results indicate that utility-run conservation programs have, indeed, been effective in reducing customer loads. The study finds no evidence the utilities have systematically overstated conservation effects.
Identifying Distributed Generation and Demand Side Management Investment Opportunities
Authors: Hoff Thomas E.
Published: May 2011

Distributed generation and targeted demand side management programs offer electric utilities alternatives to large transmission and distribution (T&P) system capacity investments. This paper presents a method to estimate how much a utility can afford to pay for these alternatives when the change in system capacity due to the distributed resource is constant from year to year and when there is no uncertainty. The method is concise, has intuitive appeal, has minimal data requirements, and is accurate when benchmarked against two existing case studies. Analysts who want to screen distributed resource investment opportunities with a minimal amount of effort will find the method particularly useful.