IssuesinEnergyEconomics:PolicyandAnalysis

Econ162

Spring2017, MW3:00-4:15p.m.

Course Objective

Introduceanddiscusspast,presentandfutureeconomicandtechnicalissuesrelatedtoenergyresources, production,conversion,substitution,use,efficiency,andpolicyinapoliticaleconomicscontextwithrespectto marketstructures,supplyanddemand,socialsurplus,costsandbenefits,impactsandchoices. Theattentive studentwilllearnaboutmanyofthemythsconcerningenergyinmodernsocietyandacquiresufficient informationtobeabletoevaluatenewenergyproposals,legislationandeventsinanobjective,realistic, knowledgeableeconomicsframework.

Instructor

Dr.J.T.Kelly

Office:1011BeniciaHall Phone:(916)278-3576

E-mail: t.kelly@.csus.edu

OfficeHours:MW2:00–2:45p.m.andbyappointment

Textbooks

CoursePack:ReadingsinEnergyEconomics,comingsoontotheHornetBookstorefromXanEdu.

Web-CTmaterial,web-basedarticles,classhandouts.

Course Grade

PopQuizzes,Homework:10%

2 Mid-TermExams:20% each

FinalExam:20%

Weekly Journal:30%

ExtraCredit: Superior ClassParticipationAttendance – up to 3 points on final grade

WrittenAssignments – No excuses-pleasedon’task

Acollectionofweeklyjournals,keptcurrent,withreflectiononwhatyousee in the news as related to what we have coveredabout energyandeconomicsinthiscourse: Energy, You, Economics and Cutting Edge issues.Use thin insert binders rather than notebooks. BringyourjournalstoeveryWednesday class:theywillbecollected, reviewedandgradedatirregularintervals. Therewillten benomakeups;theymustbekeptcurrentto receivemaxcredit.Yourcomprehensivecollection,with ten entries and anoverview(not a summary) ofnomorethan2pages,isduebyApril 12.

Testing

Exams–Themid-termsandfinalexamswillbeacombinationofmultiplechoice,shortanswer (True/False/Depends andexplainyouranswer)andessays. Typically,about1/3ofyourexamwillbe willbeM/C,1/3TFDand1/3essay. Becausethecourseisdesignedaccordingtothedifferentenergy sectors,thetwo Midtermswillcoverdifferentenergytopics buttheFinal Examiscomprehensive.

PopQuizzes–Aredesignedtoencourageattendance,helpyoukeepupwithreadingandlecturesand improveyourgrade. Quizzesmayormaynotbeannouncedpriortotheiroccurrence;onlythosethat showupforclasswillknowforsure. Unannouncedcallsforweeklyjournalsmayalsobemade. If

youmissaquizorachancetoturninyourweeklyjournal,thatopportunityisforevergone:thereare no“DoOvers.”

WeeklyJournals

Keepinga10-entry journalbasedonclassmaterialwillhelpyouorganizeyourideasandnewknowledge.Youare expectedtonoticeandreport1) Energy,2) Your own thinking/analysisintheworldaboutyou(including media,personalexperienceandothersourcesthatrelatetowhattookplaceinclass and assignments andwhatyouhave"taken away"as a result),3) Economicsand 4) Currentevents(or EYE-C).The10-entry, typewritten (1.5-spaced Arial 11-point type) weeklyjournalentriestypicallyshouldbeat leastonepage,butnotmorethan two. Youmaychoosetowriteindividual topicjournals,or on rare occasion use two entriesfor acoherentcontinuationofa single subjectmatter. ThecollectionofyourjournalsisdueApril 26. Iwillasktoseeandgradeyour journalsatirregularintervalsthroughoutthesemester.Ifyoucannotattendaclass,leaveyourJournalwitha classmateincaseIaskforitthatday–thereareno“makeups.” Journalswillbegradedapproximatelylargelyonthe topics above, plus readability,neatness,organizationoftheideas,ortopics,andgrammar.

ApproximateScheduleSpring2017

Possibilities:Field trip; guest lecture

Grades

LetterGrade / Percentage / Performance
A / 91.5-100% / ExcellentWork
A- / 89.5-91.4% / NearlyExcellentWork
B+ / 88.5-89.4% / VeryGoodWork
B / 80.5-88.4% / GoodWork
B- / 79.5-80.4% / MostlyGoodWork
C+ / 78.5-79.4% / AboveAverageWork
C / 70.5-78.4% / AverageWork
C- / 69.5-70.4% / MostlyAverageWork
D+ / 68.5-69.4% / BelowAverageWork
D / 59.5-68.4% / PoorWork
F / 0-59.4% / FailingWork

Course Structure

IntheClassroom—

Thenatureofthecoursewillbeface-to-facelecture,PowerPointslides and occasionalwhiteboardexplanations.

Announcements—

Announcementswillusuallybemadeduringlectures,butsometimesalsosentbyemailorSacCT.Besureyour e-mailaddressiscurrentwithCSUSandyourmailboxisnotfull.

Responsibilities—

Iwillcometoclasswellprepared;respondtoandencouragequestionsandotherappropriateclassparticipation; gradeyourquizzes,examsandanyotherassignmentsfairlyandinastimelyafashionaspossible;beavailable duringofficehoursandforscheduledappointments;letyouknowassoonasanychangesaremadetothe schedule,courseorclassmeetings;anddomybesttostimulateyourappreciation,interestandenthusiasmfor economics. Thetextbookbringsasmuchhumortothestudyofeconomicsasisfeasible,givencoursematerial.

Iexpectyoutoreadthesyllabusthoroughlyandunderstandthegroundrules;attendandactivelyparticipatein class;completealltheassignedreadingsinatimelymanner;askquestionswhenyouarelostorconfused;ask questionsevenifyoufeartheymightbe“dumb”orthatyou’retheonlyonewhodoesn’tgetapoint(believeme, youarenotalone);seriouslythinkaboutthematerialandstudyforandcompleteallquizzes,midtermandafinal examination.Ialsoexpectthatyouwillrefrainfromaskingmetomakespecialexceptionsjustforyou concerningrequirementslaidoutinthissyllabus.

CaveatEmptor–Asyouhavelearnedbyvirtueofhavingsuccessfullycompletedeconomicscourses, economicsisadisciplinethatisbuiltupcumulatively,brickbybrick,soisnotasubjectthatyoushouldletslide untilthelastminute,fallbehindonreadingsorfailtoaskquestionsassoonasyourealizeyoudon’tunderstand something.Askclassmates,aneconomicsstudentassistantorme.Formingstudygroupsisalsoagoodwayto learnthematerial.Evenifyouarethebeststudentinthegroup,youwillstilllearnthroughyoureffortsto explainthematerialtoothers.Ifatanypointduringthesemesteryouarehavingdifficulty,PLEASEcomesee mesoonerratherthanlater.Ifyoudokeepupwiththematerial,mostofyoucandowellinthecourse.

Exams, Assignments and Readings

• Creditforabove-averageclassparticipationisverydifficulttoachieveifyouarenotinclass.

• Imayormaynottakerolleachclassatornearthebeginningofthelecture,sopunctualitymatters.

•Giveyourselfampletimetocompleteassignments.Theseassignmentsarechallengingandimportantfor yourperformanceintheclass.Iencourageyoutospendtimeworkingthroughthemcarefullyandtoseek outhelpfromaclassmate,aneconomicstutor,ormewhenyouencounterproblems.

• Pleaseaskmequestionsifyoudonotunderstandapartofthelectureorthereadings. Andpleaseaskyourquestionseitherinclassorduringofficehours.Ibelievethatitisparticularlyimportantthatyouask yourquestionsduringtheclasssothatotherstudentswillbeabletolearnfromthem,too. Youmayfear thatyouaretheonlyonelostandthatyourquestionswillbetrayignorance,butnothingcouldbefarther fromthetruth:many,ifnotmost,studentswillhavethesamequestionsbuthopethattheywillfigureit outsomehowontheirown.Also,themomentmaypassandyou’llforgetthequestionorthematerial itself.Thusitisimportantnottogiveintothetemptationtoholdthequestionuntilclassisjustover, wheneveryoneelseandIwillbedepartingforthenextclassandthenextclassandprofessorwillbe comingin.

•Popquizzeswillbegivenapproximately3-4timespermonth,usuallyatthebeginningofclass. They typicallycontainoneshortdiscussionquestionconcerningeitherthepreviouslectureoranassignment madeforthatday.

•Examsareclosedbookandgiveninclass.Allexamsarecomprisedofwrittenresponse,true/falseand multiple-choice,TFDandessayquestions,requiringalargeBlueBook,Scantron882-Eform.Pleaseuse apenforthewrittenquestionsandaNo.2pencilfortheScantronquestions.

•Allexamdatesarealreadyscheduled–March8andApril 26.Astherearenomake-upexams, thesedatesaresetin advancesothatyoucanarrangetobehereforthem.

  • If your grades are high enough, such as “A”s and “A+”s, you may be able to exempt the final exam.
  • FreepeertutoringineconomicsforthisclassisavailableintheDepartmentofEconomics.Tutoringhours typically arepostedintheDepartmentofficeduringthefirstweekofclasses.

Policies

•Asastudentinthiscourse(andatthisuniversity)youareexpectedtomaintainhighdegreesof professionalism,commitmenttoactivelearningandparticipationinthisclassandalsointegrityinyour behaviorinandoutoftheclassroom.Academichonestyisexpected.Studentssuspectedofcheating willbereportedtoJudicialAffairs.

•Therewillbenomakeupquizzesorexaminations.Examdatesaregiveninthecourseoutline.Thisisto avoidanypotentialconflicts.Attendanceisbothexpectedandhighlyrecommended.Ifyoumissaclass, besuretocheckwithyourfellowclassmates,toseewhatmaterialyoumissed;Irecommendfindingat leastone“studybuddy”andjoinastudygrouptofacilitateinformationflowforexamsorincaseofan absence.Cometoclassontime;youwillnotbegivenextratimeifyouarelateforapopquizoran exam.

•Ifyoudecidetowithdrawfromthisclass,makesureyoudosowiththeregistrar.Ifyouwithdraw withoutpermission,youwillbeassignedafailinggrade.Onceastudentsubmitsworkforagrade, he/shewillnotassignedagradeof“WU”underanycircumstances.Keepmobiledevicesoffduring class,includinglaptops.Ifyouwishtouseyourlaptopduringclass,pleasecomespeakwithme.You maynotuseyourphone/MP3playerasacalculatoronexams.Youmayuseacalculatorwithout programmingcapabilities.

•Keepallyourexamsandquizzesandproblemsetsuntilafterreceivingyourfinalgrade,forfuture reference.

•Iwillbeavailablebyphoneduringofficehours,soifyouhavequestionsandcannotgettomyoffice then,pleasephonethemin.remember,though,Ialreadymayhavestudentsintheoffice.

•Apersonwithadocumentedillnessformissingonemidtermexamwillhavetheweightofhis/her midtermaddedtotheirfinalexam,sothattheirfinalexamwillbe90%ofthegrade. Failuretoprovide therequireddocumentationwithinoneweekfromthedateoftheexamwillresulttoagradeofzerofor theexam.

•Ifyouhavealearningdisabilityoraphysicaldisabilitythatrequiresaccommodation,pleaseletme knowassoonaspossible.Itisthestudent’sresponsibilitytoprovidedocumentationofdisabilitytothe OfficeofServicestoStudentswithDisabilities(SSWD)andmeetwithaSSWDcounselortorequest specialaccommodationbeforeclassesstart.SSWDislocatedinLassenHall1008andcanbecontacted byphoneat(916)278-6955(Voice)(916)278-7239(TDDonly)orviaemailat .

•AllneedsthathavebeenverifiedthroughtheServicestoStudentswithDisabilities(LassenHall)will beaccommodated.

Lifelessons

Ifyoufindthatyouhaveanytroublekeepingupwithassignmentsorotheraspectsofthecourse,make sureyouletmeknowasearlyaspossible.Asyouwillfindinlife,buildingrapportandeffective relationshipsarekeytobecominganeffectiveprofessional.Makesurethatyouareproactivein informingyourinstructorswhendifficultiesariseduringthesemestersothattheycanhelpyoufinda solution.

DroppingthisCourse

Itisthestudent’sresponsibilitytounderstandwhentheyneedtoconsiderdis-enrollingfromacourse. RefertotheSacStateCourseSchedulefordatesanddeadlinesforregistration.Afterthisperiod,a seriousandcompellingreasonisrequiredtodropfromthecourse.Seriousandcompellingreasons includes:(1)documentedandsignificantchangeinworkhours,leavingstudentunabletoattendclass,or (2)documentedandseverephysical/mentalillness/injurytothestudentorstudent’sfamily.

Economics162

CourseTopicsQuestions

Spring2017

1.GeneralEnergyEconomicsApplications

1.1Explainthemostimportanteconomicsprinciplesinenergyandgiveexamplesoftheirapplication.

1.2WhatareNetPresentValueandsocialdiscountrate,andhowaretheyusedforenergypolicy?

1.3Howdoesmarketstructureaffectenergyuse,supplyandpolicy?

1.4Whatdoeseconomictradetheorysuggestaboutwhetherweshouldbuyenergyfromotherstatesandforeign countries?

1.5Who/Whatcausedtheelectricitycrisisof2000-2001?

1.6TheCobwebTheoremrefersto“Charlotte’sWeb.”(T/F)

1.7Jobsmaybethemostimportanteconomicfocusforenergypolicy.(T/F)

1.8WhatisCalifornia’sEnergyPlan?

1.9WhatarethepoliticaleconomicsasappliedtoenergygovernanceinCalifornia?

1.10 Pricecapsshouldbeusedintimesofincreasingenergyprices.(T/F)

1.11 Compareandcontrastenergyregulationandgreenhousegasregulation.

2.ElectricityDemandEconomics

2.1Compareandcontrastthemajormethodsofforecastingelectricityandnaturalgasdemand.

2.2Define--andexplaintheeconomicprinciplesbehindtheconceptof--dynamicpricing.

2.3Whatdoes“averageweather”meaninelectricityandnaturalgasdemandforecasting?

2.4Howdoespeakelectricitydemandrelatetotemperature?

2.5Howdoesashifttodaylightsavingtime–anddoubledaylighttime–saveelectricity?

2.6Whatisthevalueofanelectricityoutagepreventedandhowisitdetermined?

3.ElectricitySupplyEconomics

3.1Whataretherolesofnaturalgasandgaspricesinelectricitygeneration?

3.2ExplaintheeconomicprinciplesbehindtheargumentthatCaliforniashouldembraceLNG.

3.3Forasingle-productmonopolywiththeusualU-shapedLRACcurve,istherangeofoutputoverwhich naturalmonopolyholdsfromzerototheoutputcorrespondingtominimumLRAC?Whyorwhynot?

3.4Wastheelectricityindustrybehaviorin2000/01likeOPEC’s?

3.5Whatarethe3+degreesofpricediscriminationandhowaretheyappliedintheelectricityindustry?

3.6WhatistheAverch-Johnsoneconomichypothesisandhowdoesitaffecttheelectriccompanies’behavior?

3.7Compareandcontrastsimplecycleandcombinedcyclegenerationandexplainwhythedifferencematters.

3.8Whataretheeconomicdilemmasfacingregulators,includingrateregulation,incentivesandperformance?

3.9Whatistheloaddurationcurveandhowdotheeconomicsofpowerplantcostsfactorintothe“loading order”ofgenerationresources?

3.10 Whatistheprobabilityofarotatingoutage(blackoutcausedbygenerationshortage)inCalifornia?

3.11 Compare the electricity doughnut with the natural gas pipeline network.

3.12 Have we reached peak natural gas?

4.EconomicsofNonrenewableResources

4.1Explainhowthefuturevaluesofresourcesuppliesarecomparedtotoday’s.

4.2WhatistheHotellingeconomicsprincipleofsupplyinganonrenewableresource,suchasoil?

4.3Explain–mathematically,graphicallyandeconomically–theintertemporal(dynamic)supply-demand equilibriumsovertimeperiodt.

4.4Describeandgraphthesupply/demandmodeldeterminationoftheoptimalamountofanonrenewable

resourcetoproduceovertwoperiods.

4.5Monopolypowertendstoincreasetherateofextractionofanonrenewableresource.(T/F)

4.6Whatfactorstendtoincrease,andwhichtendtodecrease,therateofextractionofanonrenewable resource?

4.7Whatarethedifferencesamong“marginalusercost”,‘rent”,“royalty”and“profit”?

4.8Typically,oneresourcewillbeexhaustedandthenitsbackupresourcewillbedeveloped.(T/F)

4.9“Sustainability”conditionsfornonrenewableenergyresourcesissimilartothoseforbiologicalresources. (T/F)

5.Oil

5.1Wearerunningoutofoil,afiniteresource,sowehavetofigureoutwhattodosothatwedon’trunout. (T/F)

5.2Whywastheperiodfromthemid1930stotheearly1970sknownas“Thegoldenageofoil”andwhowas

responsibleforit?

5.3Californiamustimportmostofthepetroleumitrefines.(T/F)

5.4Whyisthemarketforcrudeoilmoreinternationalthanthemarketfornaturalgas?

5.5Californiarefinerieshaveexcesscapacity.(T/F)

5.6Derivethedomesticdemandforimportedoil.

5.7Whatarethemacroeconomicimpactsofworldoilpriceincreases?

5.8Demandelasticityforgasolineisaboutthesameasforelectricityornaturalgas.Whyisthat?

5.9Howdoestheelasticityoftheoilindustrysupplycurveaffectthewelfareimplicationsofpriceceilings?

5.10 Explainthebasiceconomicdriversbehindanoilcartelmember’sincentivetocheat.

5.11 Becauseofadditionalnationalsecurityneedsafter9/11,weshouldeliminateoilimports.(T/F)

5.12 Warisgoodfortheoilindustry.(T/F)

5.13 HowdoesanincreaseinthepriceofoilaffecttheU.S.macroeconomy?

5.14Explain the economic forces in the oil refining business andtheir effects on California gasoline prices at the pump.

5.15Derive the demand curve for OPEC oil.

5.1. Why don’t we see more refineries?

5.17 Explain the economics behind OPEC oil pricing.

5.18 What are the economic and environmental issues in further oildevelopment in California and the west?

5.19 Why is California gasoline more expensive?

Interesting EnergyWeb Sites –CaliforniaPublicUtilitiesCommission –InternationalEnergyAgency –U.S.EnergyInformationAdministration –U.S.EnvironmentalProtectionAgency

–TheHeritageFoundation

EnergizingAmerica:ABlueprintforDeregulatingtheElectricityMarket.

Giantmediacompanyreportsonmanyaspectsofvariousandsundryenergytopicsandevents

Platt’senergynewsletterproclaimsitselftobetheworld’slargestandmostauthoritativesourceofenergy industryinformationandservices.

AmericanPetroleumInstitute. PaidforbyIndustry,butagoodsourceofdata.

API–EconData/Anal(forex.,histgasolineprices:today+100year’saverage.

Interactiveoilindustryprogram–everythingfromexplorationtodrilling. Waycool.

Gasoline,OtherFuelsandYou–data,easy-to-followexplanations,perspective.

Afascinating,ifeclecticcollectionofvarioushistoricalhappeningsintheoilindustry,startingwiththeveryfirst

recordedoilsamplein1850. Wellandconversationallywrittenstories

Self-pacedvirtualande-toursofrefineries,describestherefiningprocessusingtermsanyonecanunderstand.

Asimplygreatpamphletthatsummarizes“ThingsOil”injustafewpages,frommillionsofyearsagotothe

“SevenSisters”andguessesaboutthefuture. AMustRead.