Facebook LinkedIn Twitter
Energy Journal Issue

The Energy Journal
Volume 8, Number 2

IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

View Cart  

Debate - IAEE 1986 Annual Conference: Debate Between T. Boone Pickens and Lester C. Thurow

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-1View Abstract

Editor's Note: The following is a slightly edited version of the debate "Policy Implications of Oil Industry Restructuring" held at the Eighth Annual North American Conference of the I.A.E.E. in November 1986. The discussants were Mr. T. Boone Pickens (General Partner of Mesa Limited Partnership) and Professor Lester C. Thurow (noted author and the newly announced dean of M.I.T.'s Sloan School of Management). Mr. Pickens is a leader in the recent restructuring of the oil industry, while Professor Thurow is a prominent analyst of its implications. This debate (with the question-and-answer session omitted for reasons of space) is presented because of the importance of the issues discussed, the caliber of the speakers, and the colorful and lively exchange of ideas.

The Residential Adoption of Electricity in Early Twentieth-Century America

Arthur G. Woolf

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-2View Abstract

The commercial development of electricity in the late nineteenth century brought about a technological revolution comparable to, if not exceeding, the development of the steam engine more than a century earlier. While the steam engine laid the groundwork for the Industrial Revolution and altered the social, economic, and political framework of eighteenth and nineteenth-century Western Europe, the development of electricity had an equally significant impact in a later era.

Oil Demand Elasticities in Nigeria

Felix B. Dayo and Anthony O. Adeghulugbe

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-3View Abstract

Crude oil, which was first discovered in Nigeria in 1956 by the Shell-BP Development Company, has contributed significantly to the country's economic development. The exploitation of this resource transformed Nigeria's balance of trade from chronic deficits to huge surpluses (especially during the early-to-mid 1970s). This occurred as a result of the increase in the volume as well as the value of crude oil during this period. However, the surplus started to decline in the mid-1970s due to a combination of increased imports (resulting from the oil-boom mentality that had developed) and reduced crude oil exports (caused by the downward trend in world economic situations). By late 1977 the country again had a deficit on visible trade.

Canadian Natural Gas Exports, Domestic Gas Prices, and Future Gas Supply Costs

John Rowse

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-4View Abstract

Exports of Canadian natural gas hasten the day when Canadians must pay higher gas prices. Hence the desirability of exporting natural gas is strongly affected by current and future supply costs. In this paper I analyze the interaction of Canadian gas exports, domestic gas prices, and future gas supply costs using a multitemporal nonlinear optimization model of natural gas allocation. Maximizing the present value of Canadian consumer plus producer surplus and net revenues from export sales, this model allows for the spatial dispersion of gas reserves and domestic markets, the spatial dispersion of U.S. markets, differing recovery profiles for different supply options, and rising marginal costs of conventional gas supplies.

The Impact of Nuclear Power Plant Construction Activity on the Electric Utility Industry's Cost of Capital

Keith Berry and Samuel Loudenslager

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-5View Abstract

All across the United States, electric utilities are now faced with the prospect of prematurely abandoning partially completed nuclear units. While there are many reasons for this dilemma,[ the ratemaking implications are profound. They force regulators to make the unsavory decision as to the appropriate allocation of the fixed costs sunk in the abandoned projects between ratepayers and stockholders.' If a significant number of these plants are abandoned, the dollars at stake (estimated to be as large as $66 billion') in any ratemaking division of accountability are staggering.

Separating the Changing Composition of U.S. Manufacturing Production from Energy Efficiency Improvements: A Divisia Index Approach

G. Boyd, J. F. McDonald, M. Ross, and D. A. Hansont

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-6View Abstract

The demand for energy is normally broken down into five sectors: industry, utilities, the residential sector, the commercial sector, and transportation. Industry is the most heterogeneous of these with manufacturing accounting for about 80 percent of total industrial energy demand. Manufacturing is itself a very heterogeneous collection of production activities. As defined by the Standard Industrial Classification (SIC) method of the U.S. Department of Commerce, there were 448 manufacturing sectors in 1972.

Energy and Economic Effects of Utility Financial Incentive Programs: The BPA Residential Weatherization Program

Eric Hirst

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-7View Abstract

Many electric utilities offer their residential customers substantial financial incentives (low-interest loans or rebates) to install energy-efficient equipment and building retrofit measures (Stern, Berry, and Hirst 1985). For example, the Tennessee Valley Authority gave zero-interest loans to almost 500,000 households between 1977 and 1985; these loans average almost $1000 each for installation of retrofit measures (TVA 1985). Pacific Gas and Electric Company spent almost $100 million on administrative and debt service costs for its residential retrofit loan program, in which about 500,000 households participated (California PLC 1984).

Responses to Energy Efficiency Regulations

Frederick C. Bold

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-8View Abstract

Despite all the thunder and commotion surrounding energy usage and regulation, there is little comprehensive and systematic theoretical analysis of some of the most common forms of energy usage regulation. These regulations can take a variety of forms such as quantity rationing, price controls, tax incentives, building codes, and efficiency standards. With respect to legislated efficiency standards, some progress is made in a series of articles appearing in The Energy Journal concerned with the effect of compulsory efficiency improvements on energy consumption. The first is J. Daniel Khazzoom's "Economic Implications of Mandated Efficiency in Standards for Household Appliances." This article is followed by comments and extensions by Michael Einhorn, by Stanley M. Besen with Leland J. Johnson, and by a response to Besen and Johnson by Khazzoom and Sanford Miller. A second article by Einhorn deals with the differences in the Khazzoom and Besen-Johnson approaches.

Thermal and Economic Measures of Energy Use: Differences and Implications

Jean-Thomas Bernard and Pierre Cauchon

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-9View Abstract

Statistical agencies often report aggregate energy use by expressing different energy types on a common basis with thermal conversion factors. Before the energy crisis of the 1970s Turvey and Nobay (1965) indicated some pitfalls associated with thermal conversion factors in the analysis of aggregate energy use. This point has been emphasized again by Berndt (1978). More recently Hong (1983) compared two Divisia indexes of energy use-one of the expenditure shares and the other with thermal shares-and he found the two indexes behaved differently in the United States from 1950 to 1978. The relationship between the relative prices of energy types, which change over time, and their relative thermal contents, which are usually taken to be constant, explains why these two measures of energy use follow different paths.

Direct Investment in Conservation Measures by a Public Utility

Anthony M. Marino and Joseph Sicilian

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-10View Abstract

During the period 1978-1980, public policy toward U.S.-regulated utilities mandated residential conservation programs. Public utilities encouraged residential customers to invest in home conservation measures to help meet the national goal of energy security. The actual programs growing out of this legislation can be grouped as information programs (such as the energy audit program), financial incentives or subsidy programs, and direct investment programs. Our focus is on the third type wherein the public utility itself does home-retrofit conservation work (weather stripping, caulking, storm windows and doors, and attic and wall insulation), and the residential customer pays no direct charges. (In Marino and Sicilian (1986) we provide an economic analysis of information and financial incentives programs.) Our principal goals are: (a) to give an economic explanation of why a regulated utility would want to provide conservation measures that reduce the demand for its primary product and (b) to examine whether existing regulatory structure and utility programs are likely to lead to economic efficiency in conservation investment. We also provide an idealized regulatory structure and conservation program that does lead to economic efficiency.

The Reserve-Production Ratio

Ferdinand E. Banks

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-11View Abstract

A good concise examination of the significance of the reserve production (R/P) ratio for the future availability of oil can be found in a short paper by Edward W. Erickson in the Energy Journal (1985). He notes that the worldwide R/P ratio is 35, but this ratio is not uniform across the world. For the three core countries of the Gulf (Saudi Arabia, Kuwait, and the United Arab Emirates) it is 100. For the rest of the world it is 25, although according to my calculations, for the world outside OPEC and the communist areas it may be close to 18. Furthermore, with the fall in OPEC production that has taken place over the past few years and the rise in production outside of OPEC, about half of the world oil output is now generated in areas where the aggregate R/P ratio is less than 20.

The Great Plains Gasification Project: The Problem of Juridical/Administrative Incompatibility

Robert A. Solo

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No2-12View Abstract

Such is the public memory (and so completely has the problem vanished from the scene) that some will recall only with difficulty the vast and costly program on which President Jimmy Carter staked so much-to reduce the American dependence on imported petroleum through the production of substitute synthetic fuels from coal. The major component of that program was a project to produce a synthetic natural gas from coal. And yet even in 1982 in a special issue of The Energy Journal devoted entirely to natural gas, so absorbed were the authors with the process of decontrol, market distortions in a situation of partial decontrol, and apprehension at the prospect of a possible windfall profit tax that the matter of synthetic fuels had dropped entirely out of sight. There was not a single mention of Project Independence. Nor was there any concern for the fundamental problem of replacing a depletable and rapidly depleting resource.