ENCO 4312: Energy Economics

Topics

Resources and assignments

Date

1. Introducing the course

Peak oil assignment (via email)

Aug 28

2. Scarce oil resources and energy supply and demand

a)   The fundamentals of energy (and any other kind of) economics

In class auction exercise

Sep 2

b)   More on supply and demand

In class auction exercise

ASSIGNMENT DUE

Sep 4

c) Supply and demand analysis – interpretation

Sep 9

3. Oil resources – economic considerations

a) Reserves and resources; Introduction to discounted cash flow analysis

Reading assignment: SPE Petroleum Resources Management System - Guide for Non-Technical Users, SPE et al.(2007). OPTIONAL: More information on SPE definitions of petroleum reserves and resources.

Sep 11

b) Role of oil prices in reserve valuation

BACKGROUND: Bosselman, et al., Ch. 6A, "Domestic Petroleum: Some Basics."

Sep 14

c) Understanding oil markets and oil prices

Reading assignment: Hamilton, "Understanding Crude Oil Prices." (December 2008)

Example spreadsheet: Simple discounted cash flow

Sep 16

Sep 18

d) More on reserve evaluation

Reading assignment: SPEE, Recommended Evaluation Practice #1 – Elements of a Reserve Report; SPE/AAPG/WPC/SPEE, Petroleum Resources Management System, pages 1-19.

Sep 21

d) The role of OPEC

Reading assignment: Adelman, “The Real Oil Problem," Regulation, Vol.27, No. 1 (2004).

HOMEWORK ASSIGNMENT #2: SAMPLE REPORT

Sep 23

Sep 25

4. Natural gas resources

a) Natural gas markets and prices

"Natural gas prices: Do oil prices still matter?"

Corrected - BACKGROUND READING: Bosselman, et al., Ch. 6 8.A., "Natural Gas: Some Basics"

Sep 28

b) Economics of natural gas supply

EIA, "Is natural gas production increasing"

Sep 30

c) LNG, Alaskan natural gas, and future natural gas prices

No Reading Assignment

HOMEWORK ASSIGNMENT #2 DUE - SEND REPORT BY EMAIL

Oct 2

d)  An international gas cartel?

Reading TBD

Oct 2

5. Risk and uncertainty in reserve evaluation

a)  Risk and uncertainty

Bailey et al., “Taking a calculated risk”, Oilfield Review, 2000, pp. 20-29 only.

Oct 5

b)  Using decision trees and other techniques

Bailey et al., "How oil companies use real option valuation",  p. 9 only in "Unlocking the value of real options," Oilfield Review, 2003/2004. [OPTIONAL: Read full article.]

Oct 7

c) Portfolios and risks

Smith, "Petroleum project evaluation," MIT working paper 03-011, 2003, pp. 9-13 only. [OPTIONAL: Read full article.]

Oct 9

d) Introduction to Monte Carlo analysis

In class activity

[OPTIONAL: Scheig and Barnett, "Monte Carlo Simulation Improves Decision Making," Natural Gas & Electricity, May 2007.]

Oct 14

Mid Term exam

Midterm review

Oct 16

6. Retail markets for gasoline

a) Gasoline prices

Homework Assignment: Retail Gasoline Prices (due Oct 21)

Read: "Do Gas Prices Rise Faster Than They Fall?"
(and correct link to "Rockets and Feathers")

Oct 19

Oct 21

b) Industry structure: Refiners, pipelines and retail markets

Trench, "How pipelines make the oil market work,"

Oct 23

Oct 26

c) Industry structure: Retail and wholesale gasoline market interaction

FTC, Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition, 2005. Read the Executive Summary and Chapter 4, "Supply, Demand and Competition at the Regional Level," (pp. 69-97)

Eight Questions on Regional Gasoline Market

Oct 28

Oct 30

7. Natural resource and environmental economics

a) Tragedy of the commons

Hardin, "The Tragedy of the Commons," Science, 1968. (Focus on the sections "Tragedy of Freedom in a Commons" and "Pollution.")

OPTIONAL: Bosselman et al. discussion of the tragedy of the commons in context of energy resources, pp. 1034-1036.

Nov 2

b) Rules and resource use

De Young, "Tragedy of the commons," Encyclopedia of Environmental Science, 1999.

ALSO REQUIRED: Bosselman et al., Ch. 6, sections C.3. (Secondary Recovery) and C.4. (Unitization).

Are unitization agreements examples of what De Young calls "durable common pool resource institutions"?

Nov 4

c) Externalities

In class activity

HOMEWORK ASSIGNMENT will be sent by email after class

Nov 6

Nov 9

d) Economic analysis of environmental policy

Paul Portney, "Benefit-Cost Analysis," The Concise Encyclopedia of Economics, 2008

Nov 11

e)  Experience with SO2 permit trading

Reading

In class exercise

Robert Stavins, The making of a conventional wisdom", From An Economic View of the Environment, April 13th, 2009.

Nov 13

Nov 16

Nov 18

f) Regulating greenhouse gases: cap-and-trade or carbon tax?

Greg Mankiw, "One Answer to Global Warming: A New Tax," New York Times, September 16, 2007.

Eileen Claussen and Judith Greenwald, "Handling Climate Change," Miami Herald, July 12, 2007.

Deborah Solomon, "Climate Change's Great Divide: Lawmakers favor carbon caps, economists prefer a tax," WSJ, September 12, 2007.

Nov 20

Nov 23

8. The changing energy economy

 a) The future of oil and gas: Controversy over shale gas production

Reading TBD

Nov 30

Dec 2

  a) The future of oil and gas: Peak oil debates, continued.

Reading TBD

Dec 4

Dec 7

Dec 9

Final Exam

1:30 PM – 4:00 PM.

Dec 11