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Energy Journal Issue

The Energy Journal
Volume 8, Number 4

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Utilities and Cogeneration: Some Regulatory Problems

Peter Zweifel and Konstantin Beck

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-1
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Cogeneration-a technology which uses waste heat for electricity generation-has been known for over one hundred years. To be economically viable, it requires that excess electricity be fed into a grid for distribution. In the U.S., utilities have been legally obliged by PURPA legislation (Public Utility Regulation Practices Act) to put their grids at the disposal of electricity suppliers in industry. Nonetheless, cogeneration has recently accounted for no more than 14 percent of electricity used in industry (Anandalingam, 1985). Thus, PURPA legislation may not be enough to open markets to cogenerators.

On Marginal Cost Pricing When Consumers Can Also Produce

S. Abraham Ravid

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-2
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Marginal cost pricing, so often praised in theoretical as well as empirical studies, is correct only for a very idealised economy. When a theoretical model is adjusted for some real world concerns, pricing at marginal cost begins to seem impractical and often incorrect. Baumol and Bradford (1970) wrote perhaps the most striking article along these lines, showing that in an economy where the government has authority to tax, marginal cost pricing is not optimal and second-best solutions are called for.

The IEA Oil-Sharing Plan: Who Shares with Whom?

David R. Henderson

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-3
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The United States and twenty other countries are all members of the International Energy Agency (TEA). The members' have an agreement which requires' them to share their oil with each other if the oil supplies to the members fall substantially. Both the formula for allocating oil among members and the size of the reduction in oil supplies that triggers the sharing formula are predetermined.

Energy Demand Modeling with Noisy Input-Output Variables

Lov Kumar Kher, Fereidoon P. Sioshansi, and Soroosh Sorooshian

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-4
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One of the most important challenges facing energy analysts is to predict future energy consumption levels. The volatility of energy prices following the 1973 oil embargo and the unexpected elasticity of demand to higher prices caught most energy forecasters off the mark (see Energy Daily, "How It Didn't Turn Out: The Forecasters Who Failed," 1986). The same can be said of electricity forecasters who consistently overshot growth rates for over a decade despite compelling signs to lower their projections (Uhler and Nelson, 1985), (see Figure 1).

Assessing the U.S. Federal Tax Burden on Oil and Gas Extraction

Robert Lucke and Eric Toder

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-5
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This paper assesses the burden of the Federal income tax on oil and gas extraction. It examines departures from neutrality between oil and gas and other activities, among different types of oil and gas properties, and between independent and integrated producers.' Effective tax rates on different oil and gas properties are derived by computing the required profitability on new investments, given the tax laws and an assumed after-tax discount rate.Our analysis shows that oil and gas extraction is taxed more favorably than most other business activities under both current law and the law in effect prior to the Tax Reform Act of 1986 (TRA). The effective tax rate on oil and gas investments is very sensitive to characteristics of the property and of the company developing it, but it is lower than effective tax rates on otherindustries in all the cases we examined.

A Time-Series Analysis of U.S. Petroleum Industry Inventory Behavior

Robert Krol and Shirley Svorny

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-6
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This paper examines inventory behavior in the U.S. petroleum industry. Inventories of crude oil and its three major products-gasoline, distillate and residual fuel oil-are studied. Earlier empirical studies of inventory behavior have been unable to provide evidence of the production smoothing role of inventories emphasized in the theoretical literature (see Blinder, 1984). We suggest that these results are due to a tradition of relying on a partial-adjustment model to explain inventory behavior. We feel that the partial-adjustment model ignores potentially significant relationships between lagged values of explanatory variables and inventories implied by dynamic analysis. This leads us to investigate the time-series properties of petroleum inventories using the vector autoregression(VAR) methodology developed by Sims (1980).

Some General-Equilibrium Considerations for the Analysis of Oil Import Restrictions

Knot Anton Mork

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-7
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Recent events in the oil market and the persistent U.S. government deficit have sparked renewed interest in a tax or a tariff on oil. I have argued elsewhere (Mork, 1985) for such taxation from the perspective of macroeconomic stability. However, quite often the argument is based on the simple static notion that an oil import tariff will soften the world oil market and improve the terms of trade.

Energy Saving Resulting from the Adoption of More Efficient Appliances

J. Daniel Khazzoom

DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-8
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In last November's IAEE meetings, Amory Lovins reported estimatesof energy saving that will result from the adoption of more efficient appliances. This note addresses three questions related to the subject.1. The realism of Lovins' estimate of energy saving.2. The way these estimates fare when juxtaposed against the price elasticity of demand used by Lovins.3. The light my recent empirical results shed on the magnitude of energy saving we can realistically expect.In the process, the note touches on the polar opposite policies that Lovins has been advocating.