Energy Economics : A modern Introduction

Table of Contents

Preface ix
Acknowledgments xi
1. ENERGY ECONOMICS: AN INTRODUCTORY SURVEY 1
1.1 SOME BASIC IDEAS 2
1.2 UNITS AND HEAT EQUIVALENTS 10
1.2.1 Exercises 15
1.3 MORE BASIC IDEAS 16
1.4 CONCLUTIONS 19
1.4.1 Exercises 20
1.4.2 Answer quickly and Briefly 21

2. DICONTINUING AND CAPITAL VALUES 23
2.1 FIRST PRINCIPLES 23
2.1.1 Exercises 26
2.2 A VERY SMALL OIL WELL 26
2.2.1 Exercises 30
2.3 ANNUITIE 31
2.3.1 Exercises 35
2.4 SOME COMMENTS ON CAPITAL VALUES 35
2.4.1 Exercises 38
2.5 DEPLETION 38
2.5.1 Exercises 41
2.6 CONLUSIONS 41

3. THE WORLD OIL MARKET 43
3.1 SOME BACK GROUND FOR STUDYING THE RUN-UP TO THE OIL MARKET ENDGAME 45
3.2 THE PRESERVE- PRODUCTION RATIO 50
3.2.1 Exercises 55
3.3 OIL SUPPLY AND DEMAND, AND THE PRESEVE- PRODUCTION RATIO 56
3.4 A NON- TECHNICAL PREVIEW OF THE OIL FUTURES MARKET 59
3.4.1 Exercises 63
3.5 OIL STOCKS AND OIL PRICES 63
3.5.1 Exercises 70
3.6 CONCLUSIONS 71
3.6.1 Exercises 72
3.7 APPENDIX: THE DOMESTIC INDUSTRIALIZATION OF HYDROCARBONS 72

4. A FUEL OF THE FUTURE: NATURAL GAS 75
4.1 GEOLOGY, UNITS, AND SOME ECONOMICS 75
4.2 ECONOMIC THEORY AND NATURAL GAS: AN INTRODUCTION 81
4.2.1 Exercises 94
4.3 REGULATION AND DEREGULATION 95
4.3.1 Exercises 98
4.4 MARGINAL COSTS AND PEAK LOAD PRICING 98
4.4.1 Exercises 110
4.5 CONLUSIONS 110
4.5.1Exercises 111

5. SOME ASPECTS OF THE WORLD COAL MARKET 113
5.1 INTRODUCING COAL SUPPLY AND DEMAND 115
5.2 SUPPLY AND COST 118
5.3 SOME THEORETICAL ASPECTS OF COAL AND THE ENVIRONMENT 121
5.3.1 Exercises 128
5.4 COAL AND CO2 129
5.5 CONLUSIONS 132
5.6 APPENDIX: SOME TRANSPORTATION ECONOMICS 133

6. ENERGY DERIVATIVES: FUTURE, OPTIONS AND SWAPS 137
6.1 FUTURE MARKETS: TERMINOLOGY AND NOMENCLATURE 137
6.2 FURTHER MECHANICS OF HEDGING AND SPECULATION 143
6.3 BASIS RISKS 146
6.3.1 Exercises 146
6.4 AN OPTION FABLE 148
6.4.1 Exercises 153
6.5 THE SIMPLE ALGEBRA OF OPTIONS 153
6.5.1 Exercises 158
6.6 A COMMENT ON THE OPTION PRICE 158
6.7 OIL SWAPS 161
6.8 CONLUSIONS 170
6.9 APPENDIX 170
6.9.1 A-1. A Simple futures market 170
6.9.2 A-2.Rolling a hedge forward 172
6.9.3 Exercise 174

7. ELECTRICITY AND ECONOMICS 175
7.1 SOME INTRODUCTORY REMARKS 176
7.1.1 Exercises 180
7.2 DAILY LOAD CURVES AND LOAD DURATION CURVES 180
7.2.1 Exercises 186
7.3 THE ECONOMICS OF LOAD DIVISION 186
7.3.1 Exercises 193
7.4 SOME FINAL OBSERVATIONS ON ELECTRITY TARIFFS 193
7.5 CONLUSIONS 197

8. URANIUM, NUCLEAR ENERGY, AND AN INTRODUCTION TO INTERNATIONAL PRODUCTION THEORY 199
8.1 SOME NUCLEAR BACKGROUND 201
8.2 SOME INTERNATIONAL COST AND PRODUCTION THEORY
8.2.1 Exercises 218
8.3 A FEW BAD NUCLEAR VIBRATIONSAND A COMMENT ON OPTION THEORY 218
8.4 CONLUSIONS 227

9. ADDITIONS, EXTENSIONS AND FINAL REMARKS 229
9.1 THE HOTELLING HYPOTHESIS EXAMINED GRAPHICALLY 230
9.1.1 Exercises 236
9.2 CONVINIENCE YIELD 236
9.2.1 Exercises 240
9.3 ANALYTICAL ODDS AND ENDS: A STSTISTICAL OBSERVATION; THE WINNER’S CURVE; AND REAL OPTIONS 240
9.3.1 Exercises 242
9.4 CONLUSIONS: FROM THE 20ST CENTURY 246

10. APPENDIX 251
A.1 EXTRA QUESTIONS 251
A.2 ANSWERS AND PARTIAL ANSWERS TO SELECTED EXERCISES. 254
A.3 GLOSSARY 259
A.4 REFERENCES 268

11. INDEX 273