Tuesday, January 18, 2011

Energy Prices and Natural Resouorces

An application directly from Greg Mankiw's principles of economcis textbook applied to energy prices:

"In a market economy, scarcity is reflected in market prices. If the world were running out of natural resources, then the prices of those resources would be rising over time. But in fact, the opposite is more often true. Natural resource prices exhibit substantial short run fluctuations, but over long spans of time, prices of most natural resources (adjusted for overall inflation) are stable or falling. It appears that our ability to conserve these resources is growing more rapidly than their supplies are dwindling."Greg Mankiw, Brief Principles of Macroeconomics, 5th Ed Ch. 7 p. 144

There Will Be Fuel: NYT

"The same high prices that inspired dire fear in the first place helped to resolve them. High oil and gas prices produced a wave of investment and drilling, and technological innovation has unlocked oceans of new resources. Oil and gas from ocean bottoms, the Arctic and shale rock fields are quickly replacing tired fields in places like Mexico, Alaska and the North Sea...."The technology producing these resources has absolutely made the difference," Mr. Odum said. "It's the same with the Arctic, with the shale oil, all over the world. Technology is the key...."When you add it up," Mr. Morse noted, "you get something that very closely approximates energy independence."

Economic Optimism: NYT

"It's true that the real price of oil is slightly higher now than it was in 2005, and it's always possible that oil prices will spike again in the future. But the overall energy situation today looks a lot like a Cornucopian feast, as my colleagues Matt Wald and Cliff Krauss have recently reported. Giant new oil fields have been discovered off the coasts of Africa and Brazil. The new oil sandsprojects in Canada now supply more oil to the United States than Saudi Arabia does. Oil production in the United States increased last year, and the Department of Energy projects further increases over the next two decades.........You can always make news with doomsday predictions, but you can usually make money betting against them. "

The Energy Future Ain't What it Used to Be: NYT

"The price of natural gas and electricity will be low over the next quarter-century, and crude oil will become more expensive but not radically so, the Energy Department predicted on Thursday, in a report that contradicts widely held notions. And even without a national global warming law, American carbon dioxide emissions will not inexorably set new records; they will stay below the rate of 2005 for the next 15 years because of economic forces, the forecast said. "