1. Chapter 1 Introduction to Energy Economics Part A
Peter Schwarz, Professor of Economics
and
Associate, Energy Production and Infrastructure Center (EPIC),
University of North Carolina Charlotte

2. Chapter 1 Outline I. Why Energy Economics?
II. Energy Indispensable to Modern Life
III. Key Energy Issues
IV. Economic Approach
V. A Roadmap
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3. Why Energy Economics? (1)
In the beginning…
1973
Middle East oil embargo
Organization of Petroleum Exporting Countries (OPEC) gains control
Nationalization
1979
Second oil price shock
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4. Why Energy Economics? (2)
To the Present
2001
September 11 terrorist attacks
2008
China and India increase demand
2014
June - $100 oil the new normal?
2016
Price falls below $30 a barrel and then rebounds above $50
Where are we today?
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5. Why Energy Economics? (3)
Source: Energy Information Administration, “What Drives Crude Oil Prices?” January 2015.
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6. Why Energy Economics? (4)
Drivers
Supply
OPEC
Non-OPEC
U.S. hydraulic fracturing (“Fracking”)
Demand
Stagflation, Recession
Growth
China, India
Speculators
Value of Dollar
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7. Why Energy Economics? (5)
Related Fields
Environmental Economics
Natural Resource Economics
Ecological Economics
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8. Energy Indispensable to Modern Life (1)
Energy Intensity
Ratio of Energy/Gross Domestic Product (GDP)
Energy price has smaller impact on economy than in 1970s.
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9. Energy Indispensable to Modern Life (2)
Fuels for
Transportation
Electricity
Buildings
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10. Energy Indispensable to Modern Life (3)
Fuels for Transportation
Motor vehicles
Primary use of oil
Cleaner alternatives
Hybrids
Electric vehicles (EVs)
Mass transit
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11. Energy Indispensable to Modern Life (4)
Electricity
Flip-the-switch service
Blackouts and brownouts in India, African countries.
Sources
Coal
Natural Gas
Oil
Nuclear
Hydro
Alternatives
Wind, Solar, Energy Efficiency
Pollution
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12. Energy Indispensable to Modern Life (5)
Buildings
By some measures, largest energy user
Long replacement cycle
Leadership in Energy and Environmental Design (LEED)
Certified, Silver, Gold, Platinum
Program designed by architects, not economists
ENERGY STAR
Saves at least 15% energy compared to conventional appliances
Neither LEED nor ENERGY STAR is necessarily economically efficient.
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