ENCO 4312: Energy Economics
Course website for the Spring 2009 class will be available January 2009. |
Fall 2008
MWF 12:00-12:50PM, BA 358
Instructor: Michael Giberson
BA 316
(806) 742-3161
Office hours: Monday and Wednesday, 1:00-2:00 PM; Tuesday and Thursday,
2:00-3:00 PM; and by appointment.
Link to Syllabus and draft Course Outline in pdf format (Last revised: August 25, 2008).
Jump to Syllabus online (below the Course Outline).
Course Outline
Fall 2008
DRAFT VERSION
Consult this online version of the document for the latest information on assignments.
|
Topic |
Assignment |
(Class date) |
|
1 – Oil resources – economic considerations |
||
|
a) Reserves and resources |
Crossley, “Current Economic Conditions”, pp. 35-40 in Guidelines for the Evaluation of Petroleum Reserves and Resources, SPE (2001); BACKGROUND: SPE Petroleum Resources Management System - Guide for Non-Technical Users, SPE et al.(2007) |
(August 27) |
|
b) Oil markets and prices |
Cassidy, "Black Hole," Portfolio; Eckaus, "The oil price really is a speculative bubble," MIT working paper 08-007. |
(August 29) |
|
c) Oil in the economy |
Bosselman, ch. 6A |
(Sept 3) |
|
d) Oil markets and prices |
Hamilton, “Understanding Oil Prices” (link to abstract; link to full article). |
(Sept 5) |
|
e) Oil markets and prices |
Continuing discussion of Hamilton (parts on speculation and
fundamentals); |
(Sept 10) |
|
f) Rules and resource use |
Bosselman, ch. 6C (more Tragedy of the Commons; Unitization). |
(Sept 12) |
|
g) Reserve evaluation, cont. |
SPEE, Recommended Evaluation Practice #1 – Elements of a Reserve Report; SPE/AAPG/WPC/SPEE, Petroleum Resources Management System, pages 1-19. |
(Sept 15) |
|
h) Reserve evaluation, cont. |
|
(Sept 17) |
|
i) The role of OPEC |
Adelman, “The Real Oil Problem," Regulation, Vol.27, No. 1 (2004). First assignment introduced - See SAMPLE REPORT here for guidance. The spreadsheet from the Sept 3 class may also be helpful. (Trouble opening the spreadsheet? Try the spreadsheet in Excel 2003 format.) |
(Sept 19) |
|
|
|
|
|
2 – Gas resources |
||
|
a) Introduction to gas resources |
Bosselman, Ch. 8A, "Natural gas: Some basics"; |
(Sept 22) |
|
b) Supply of natural gas |
Classroom exercise on natural gas supply. [Bring to class data on reserves, production, and costs for natural gas supplies: conventional, shale, coal bed methane, LNG and other imports, and the Alaskan gas pipeline. ] |
(Sept 24) |
|
c) More on discounted cash flow valuation |
SPEE, Recommended Evaluation Practice #5 – Discounting Cash Flows; SPEE, Recommended Evaluation Practice #4 - Inclusion of Hedging Positions in Reserve Reports; Bosselman, Ch. 8B, "Ownership and externalities" FIRST ASSIGNMENT DUE |
(Sept 26) |
|
d) Natural gas markets and prices |
Schlesinger, "Heavy Gas Demand Coming from Coal-Fired Power Plant Cancellations," Natural Gas & Electricity, June 2007; Brown, "Natural Gas Pricing-Do Oil Prices Still Matter?" Southwest Economy, July-Aug 2005; Bosselman, Ch. 8F, "LNG Imports". [Problems getting the documents? Help finding these articles online at TTU.] |
(Sept 29) |
|
|
|
|
|
3 – Risk and uncertainty |
||
|
a) Risk and uncertainty |
Bailey et al., “Taking a calculated risk”, Oilfield Review, 2000, pp. 20-29 only. |
(Oct 1) |
|
b) Real option analysis |
Bailey et al, “Taking a calculated risk”, Oilfield Review, 2000, pp. 29-38. Second Assignment: Sample report with additional guidance. Optional blank document in MS Word 2007 format (or create your own following the sample). |
(Oct 3) |
|
c) 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. [ADVANCED: Read full article.] |
(Oct 6) |
|
d) Portfolios and risks |
Smith, "Petroleum project evaluation," MIT working paper 03-011, 2003, pp. 9-13 only. [ADVANCED: Read full article.] |
(Oct 8) |
|
e) Using Monte Carlo analysis |
Classroom exercise on Monte Carlo analysis. [ADVANCED: Scheig and Barnett, "Monte Carlo Simulation Improves Decision Making," Natural Gas & Electricity, May 2007.] |
(Oct 10) |
|
f) Summing on on petroleum project evaluation |
Mid-term exam - Review of discussion topics. SECOND ASSIGNMENT DUE |
(Oct 13) |
|
4) Energy and environmental economics |
||
|
a) Externalities and regulation |
Classroom exercise on public goods. (No reading assignment.) |
(Oct 15) |
|
|
||
|
MID TERM EXAM |
(Oct 17) |
|
|
b) Introduction to economics and environmental policy |
Stavins, "An Economic Perspective" (column), The Environmental Forum, 2004. Read column 1 on economics, markets and the environment, and column 2 on economic approaches to environmental policy. |
(Oct 20) |
|
c) Economic analysis of environmental policy |
Hahn and Parrell, "The Economics of Allowing More Domestic Oil Drilling," Reg-Markets Center Working Paper, 2008. |
(Oct 22) |
|
More on cost-benefit analysis |
Continue discussion of Hahn and Parrell article. |
(Oct 24) |
|
e) Tradable permits |
Eco-Geek, "An introduction to 'Cap and Trade' Economics," Newsvine.com. |
(Oct 27) |
|
f) Experience with SO2 permit trading |
Stavins, " Lessons Learned from SO2 Allowance Trading," Choices (2005) |
(Oct 29) |
|
g) Regulating greenhouse gases: comparing permits and taxes |
Burtraw
and Evans, "Tradable Rights to Emit Air Pollution,"
Resources for the Future, 2008. |
(Oct 31) |
|
More on tradable permits |
Continue discussion of Burtraw and Evans. |
(Nov 3) |
|
|
|
|
|
5) Retail markets for oil and gas |
||
|
a) Gasoline prices |
Classroom exercise requiring your preparations: CLASS PARTICIPATION ASSIGNMENT |
(Nov 5) |
|
b) Demand for gasoline |
(Nov 7) |
|
|
More on gasoline prices |
"Do Gas Prices Rise Faster Than They Fall?" from Slate and a short explanation of "Rockets and Feathers" from knowledgeproblem.com. THIRD ASSIGNMENT DUE |
(Nov 10) |
|
c) Gasoline pipelines and markets |
Trench, "How pipelines make the oil market work," Allegro Energy Group. [OPTIONAL: Hull, "Oil Pipeline Markets and Operations," Journal of the TRF, Vol. 44 (2005).] |
(Nov 12) |
|
More on gasoline markets |
FTC, Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition, (2005) |
(Nov 14) |
|
d) Vertical integration in gasoline supply |
Continuing with FTC, Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition, (2005), pages 118-125 on vertical integration. |
(Nov 17) |
|
e) Gasoline – retail and wholesale interaction |
Deck and Wilson, "Economics at the Pump," Regulation, Vol. 27, No. 1 (2004). [OPTIONAL: Review pages 125-128 of the FTC report on gasoline marketing practices.] |
(Nov 19) |
|
f) Price gouging |
[OPTIONAL: Zwolinski, "The Ethics of Price Gouging," Business Ethics Quarterly, 2008.] Fourth assignment introduced: Effects of refinery fire on gasoline market |
(Nov 21) |
|
g) Retail markets for gasoline |
Class exercise on retail gasoline competition |
(Nov 24) |
|
FOURTH ASSIGNMENT DUE - November 25 |
||
|
6) The changing energy economy |
||
|
Oil and gas in the future |
|
(Dec 1) |
|
Oil and gas in the future |
(Dec 3) |
|
|
|
|
|
|
|
FINAL EXAM - BA 358 - 10:30 AM |
(Dec 10) |
Syllabus
Fall 2008
|
Instructor |
Michael Giberson |
|
Office |
BA 316 |
|
Office phone |
(806) 742-3161 |
|
|
michael.giberson@ttu.edu |
|
Office hours |
Monday and Wednesday, 1:00-2:00 PM; Tuesday and Thursday, 2:00-3:00 PM; and by appointment. |
|
Website |
http://giberson.ba.ttu.edu/ENCO4312 |
|
Class |
MWF 12:00-12:50PM, BA 358 |
Course description
Focus on oil and gas project economics and capital formation. Emphasis on project cost, revenue forecasting, reserve analysis, and financial risk management.
Course materials
· Bosselman, Eisen, Rossi, Spence & Weaver, Energy, Economics and the Environment: Cases and Materials, Foundation Press, 2d Edition (2006).
· Packet for purchase at BA Copy Center. [NOT YET AVAILABLE]
· Printed readings will be supplemented by documents available online.
The Bosselman et al. book provides good background on many topics for this course and other Energy Commerce courses. The book will serve as an excellent addition to your personal professional library. (Translation: Don’t resell the book at the end of the class – hang on to it!)
Expected Learning Outcomes
After completing this course, students will be able to:
· Describe current energy market trends and relate current conditions to historical market performance;
· Explain basic oil market and gas market dynamics, focusing on consumer and producer responses to prices;
· Evaluate project economics for an oil or gas resource and produce a report in a standardized format;
· Identify uncertain factors in long-term forecasts (especially as relate to project evaluation) and employ analytical tools to guide decision making under uncertainty;
· List the primary environmental laws and regulation affecting oil and gas development, describe the economic approach to assessing environmental policies; and,
· Discuss the role that oil and gas play in the energy economy, and compare that role to alternative sources of energy used for heat, light, and power.
Methods of Assessing Outcomes
The expected learning outcomes will be assessed by review of written assignments (project reports), class participation, and performance on the Mid-term and Final Exams.
Class participation - The primary focus of most class periods will be classroom discussion of the assigned materials facilitated by the instructor. Students are expected to read assigned materials prior to assigned dates and to contribute class discussions. In addition, Students are expected to assist in maintaining a classroom environment that is conducive to learning.
Short Projects – Each major unit of the course will require the student to demonstrate understanding of the material covered by submission of a brief report.
Mid-Term Exam – Test date projected to be October 13 (during regular class time).
Final Exam – Test scheduled for December 10 at 10:30 AM – 1:00 PM.
Grading
· Class participation 15%
· Short Project Reports 50%
· Mid-Term Exam 15%
· Final Exam 20%
Additional class policies
In general, the class will follow standard university policies as described in the Texas Tech University Operating Policies (http://www.depts.ttu.edu/opmanual/). In addition, please note:
Academic Honesty: It is the aim of Texas Tech University to foster a spirit of complete honesty and high standard of integrity. Academic dishonesty will not be tolerated and will be treated according to the rules outlined in the Student Handbook.
Absences - A student who will miss class due to a university-approved trip or to observe a religious holy day should make that intention known to the instructor prior to the absence so that accommodations can be made in accordance with university policies.
Disabilities - Any student who, because of a disability, may require some special arrangements in order to meet course requirements should contact the instructor to request necessary accommodations.
Syllabus and Course Outline Changes - The instructor may adjust the syllabus or course outline during the course of the semester. Updated versions of the syllabus and course outline will be maintained on the class website (http://giberson.ba.ttu.edu/ENCO4312).