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Energy Journal Issue

The Energy Journal
Volume 1, Number 1

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America's Energy Choices - Presidential Address

Sam H. Schurr

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-1View Abstract

In trying to decide on a topic for this address I found myself wavering between a talk that would review this first, eventful year in the life of our Association as opposed to a subject which would be more substantive in nature. Substance finally won out, partly be-cause of personal preference, and partly because of the advice of others. The remarkable progress of the Association is something we are all proud of, but I believe that it has been-and will continue to be-well documented in many ways familiar to all of us. The forth-coming appearance in the near future of the Association's own professional journal will be a signal event in the unfolding story of the Association's successful development.

The Energy Crisis and Macroeconomic Policy

William D. Nordhaus

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-2View Abstract

It is hard to find an issue more confusing than energy policy. Is there a shortage of oil? Why? How long will the shortages last? Who's to blame? What will be the supply and demand response to price decontrol? What are the appropriate policy responses today? Can the president or the secretary of energy or the Congress be trusted to find the answers? And so on.

Energy Policy: An Economist's Confessions

James R. Schlesinger

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-3View Abstract

It is a particular pleasure to be addressing an association of professional colleagues. I must concede it is the first time that I have done so since I was on the faculty at the University of Virginia. The atmosphere here is a little bit chilly; you can rest assured that when our rulemaking on temperature control takes effect on July 1, you will not have this experience.

Residential Electricity Revisited

Hendrik S. Houthakker

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-4View Abstract

The following is a report on various attempts to update and improve an earlier analysis of residential electricity demand (Houthakker, Verleger, and Sheehan, 1974-hereafter referred to as HVS). To understand what is new the reader should first know what has been maintained, namely:1. the logarithmic flow-adjustment model which estimates this year's consumption from last year's consumption, this year's price and income, and possibly (though not in HVS) from other variables,2. the pooling of annual time series for 48 states using the error component approach of Balestra & Nerlove, 3. the use of a "marginal price" for electricity.The present paper may be regarded as a verification of the first of these hypotheses, and to some extent of the other two.

The Clumsy Cartel

M.A. Adelman

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-5View Abstract

The recent price explosions in the world oil market result from the tardy recognition of the post-1973 consumption slowdown. Such odd results could not happen in a competitive market, but they are not at all strange in the world of the cartel. An analogy may help explain. A diver in the sea cannot go lower than the sea floor, nor higher than the water's surface. He is nearly weightless, and can float at any depth between these extremes, but the slightest impact or effort sends him up or down. Similarly, in any market, the price cannot drop below incremental cost, since such a drop would choke off supply, nor can it rise above the level that would maximize profit to a monopoly, since the monopoly would gain by putting the price back down. But in a once-competitive market, where the price has been rising toward some unknown monopoly optimum, the price can hold steady or can move drastically up or down in response to very slight impulses. In this range the price may show no response, or even a perverse response, to changes in demand. Since 1973, price response has been perverse. This was clearly the case in 1974, as the world headed into recession. It is so again in 1979.During 1973-1978, real incomes in the non-Communist indus-trialized countries rose 13 percent, but oil use nevertheless was flat at approximately 50 million barrels daily (MBD). Exports

The World Oil Market: An Exporter's View

Alirio A. Parra

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-6View Abstract

I am deeply honored to be part of this distinguished panel and to address my professional colleagues on the occasion of the first annual meeting of the International Association of Energy Econo-mists.

The U.S. Outlook for Supplemental Gas

Arlon R. Tussing

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-7View Abstract

Current forecasts of natural gas demand in the United States through the turn of the century are lower than projections made only a few years ago, and fall far short of the volumes the economy is technically capable of absorbing even with its existing stock of energy-using equipment.

Coal Policy and Energy Economics

Richard L. Gordon

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-8View Abstract

With the flurry of legislation in 1977 further inhibiting coal consumption and production, it became apparent to many observers that coal had joined oil, gas, and nuclear energy as a tightly regulated industry. Since by now this observation has been widely dissemi-nated, it seems most appropriate here only to summarize the nature of the barriers and their obvious implications. Then emphasis can be placed on the perspectives that economic analyses can provide for evaluating the issues.

Coal Liquefaction

George R. Hill

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-9View Abstract

The relative quantities of coal, petroleum (plus natural gas liquids), and natural gas proved and currently available in the United States are 18 X 1015 British thermal units (Btu), 3.7 X 1015 Btu, and 2.5 X 1015 Btu, respectively. The relative total recoverable resources are 134 X 1015 Btu for coal, 11.2 X 1015 Btu for petro-leum, and 9.5 X 1015 Btu for natural gas (Parent, 1979). Since coal represents roughly 86 percent of the total U.S. resource, one would expect its use to approximate that percentage of the energy input in the United States. But actually, the percentage of coal in the fossil energy input is only 21 percent. Petroleum and natural gas consumption accounts for nearly 75 percent. Almost half (48 percent) of the fossil energy used in the United States consists of petroleum and its products. Since some 45 percent of this petro-leum must now be imported, it is essential that our primary re-source, coal, be used in increasing amounts. This paper presents

Comments on Coal Liquefaction

L.E. Swabb, Jr.

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-10View Abstract

Dr. Hill has given an excellent, comprehensive review of the various coal liquefaction development programs that are now in progress. In view of the limited time, I would like to comment on just one subject-the economics of coal liquefaction and the impact of the economic basis on product cost. This would appear appro-priate to the interests of this audience, as well as an important consideration when evaluating costs quoted by various sources.My comments are based on a commercial plant study design for the Exxon Donor Solvent (EDS) process made in 1975-1976 and published in an EDS project report in January 1978. This study design is now being updated, and the new coal liquids costs are probably going to change. However, the old data will serve toillustrate the point I wish to make.

Biomass Energy Economics

John R. Benemann

DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No1-11View Abstract

The energy crisis has become a permanent fixture in our lives. It is apparent that the brief era, roughly 1920-1970, of rela-tively low and declining fuel costs is over for good. The world economic system must adjust to a new era of high-cost fuels, supply dislocations, and transition to new energy sources. Large uncertainties exist about the future availability, production costs, and market prices of the conventional fuels-oil, gas, and coal. Even greater uncertainties exist about the costs of the alternative energy sources-nuclear power and renewable resources, principally solar. As more information becomes available, nuclear power is constantly required to increase its safety level, becoming ever more expensive. The high-risk, very large, very long-term capital