31 votes
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How can power/electricity prices be negative?

Yes, customers who were exposed to day-ahead wholesale market prices were paid to use electricity. It is a combination of several different factors that make the day-ahead wholesale electricity ...
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  • 8,002
12 votes
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What is the reasoning behind the sharp fall of oil prices starting in mid 2014?

My understanding of the recent drop in oil price is due to recent changes in US drilling. They are now the worlds largest oil producer. This article by the economist does a good job explaining. My ...
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  • 3,721
8 votes
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Usage of natural gas in 1970 (where was the demand elasticity?)

tl;dr: it's basic engineering: efficiencies improved between 1970 and 2010. Additionally, net USA imports increased from 0.75 trillion cubic feet in 1970 to 3.8 trillion cubic feet in 2007 I think ...
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  • 8,002
6 votes

How can power/electricity prices be negative?

As many have stated before me, you can't just throw electricity away if you produce too much—it has to go somewhere. If you put more power into the system than the resistant (or consumption) in the ...
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  • 115
6 votes

What oil price will minimise new resource extraction?

An oil price of 0 will make any extraction of oil unprofitable and hence imply no further oil extraction. You should think about how prices carry signals. A low oil price (even if not 0) carries the ...
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  • 10.4k
6 votes
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If 1% of the solar energy of the Sahara can power the entire world, why isn't it happening?

It's lots of things, which added together means it's not going to happen. Firstly, the initial calculation of area required was just to illustrate how small the world's energy use is, compared to the ...
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  • 8,002
5 votes

In Indonesia, reducing fuel subsidy strongly impacts the price of everyday goods. Why?

Consumers rarely have to pay the full price of petrol / gasoline. That's true in most of the world, and the US is no exception. There are explicit subsidies and favourable tax regimes in many ...
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  • 8,002
4 votes
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If Americans drive more and consume more oil, why are cars less efficient?

The price of petrol / gasoline is surely a major reason, offsetting the effect of longer distances. In many European countries it is more than twice as high as in the US, mainly because of ...
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  • 6,813
4 votes

What oil price will minimise new resource extraction?

What would be economically most efficient is that for the price of oil to reflect all its costs, including all the pollution costs. A price that high would destroy a lot of demand, and incentivise all ...
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  • 8,002
4 votes

How can power/electricity prices be negative?

This reflects the problem of electricity storage. With most other commodities, there is some way to store it ahead of future need, but in general this option is not so readily available with ...
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  • 164
4 votes

How can power/electricity prices be negative?

Basically negative prices reflect that there is produced more electricity than the market asks for. In all other markets, this is not a problem as you can just refuse to sell, but for electricity, ...
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3 votes
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Are there any drawbacks to a hypothetical climate policy?- Carbon tax for reducing Income tax

Prominent economist Greg Mankiw has been a prominent advocate of the kind of change you describe (he invites people to join "The Pigou Club", named for Arthur Pigou who first proposed these kinds of ...
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3 votes

What is the reasoning behind the sharp fall of oil prices starting in mid 2014?

Considering oil as a commodity that does not expire and can be relatively easily stored, I believe the reason for the recent price drop of oil is much more political than what it has to do with ...
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  • 141
3 votes

What is the reasoning behind the sharp fall of oil prices starting in mid 2014?

The basic factors in the decline of petroleum prices is the increased production in the US in the North Dakota and Texas shale oil fields as a result of the use of hydraulic fracturing in conjunction ...
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3 votes

What is the reasoning behind the sharp fall of oil prices starting in mid 2014?

I'll go ahead and admit that I do not have any empirical evidence, and this is more of factor to consider when evaluating future movement in the oil market. As oil prices drop, some US oil producers ...
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3 votes
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Oil as a function of GDP

I don't think it's any more complicated than looking at the ratio of global oil consumption and global Gross Domestic Product. The OECD, World Bank, IMF and others produce estimates of each. There is ...
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  • 8,002
3 votes
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What oil price will minimise new resource extraction?

Let us just assume, without any loss of generality, that it is OPEC nations who can produce oil most cheaply. That is, the cost per barrel for all OPEC nations is homogeneous and is lower than the ...
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  • 2,891
3 votes
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Electricity as inelastic good

It is. And it is not. Electricity markets are generally not set up for the demand-side to do much active participation at all. So the short-run demand curve as seen in, for example, Nordpool Spot, is ...
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  • 8,002
3 votes

Was the 2008 financial crisis caused more by the US subprime mortgage lending or more by an international energy and oil pricing crisis?

It's worth differentiating between the financial crisis of 2007-2009, and the recession that began in December 2007. The financial crisis was indeed caused by a run on wholesale funding that was ...
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3 votes

Benchmarking an Energy Investment

At its simplest, you just look at the cost of capital: if the household would have to borrow to pay the debt, then what's the borrowing rate? If they are currently saving, what interest rate would ...
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  • 8,002
3 votes

If renewable energy is now cheaper than non-renewable energy, why are we still worried about the climate?

To some extent, your suspicions are correct (notice some of the nuance you could add to your four main concluding points): Renewable adoption trends are slow. Not just slow, but there is a wide ...
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  • 31
3 votes
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Uniform price vs. pay-as-bid auctions in energy markets

I believe "Auctions of Homogeneous Goods: A Case for Pay-as-Bid" by Pycia and Woodward answers your questions theoretically. This is quite recent and their results are striking. They also ...
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  • 5,090
3 votes

How do you convert or move from a linear cost function to a quadratic cost function?

Your eq (2.10) is not more general than (2.9), but corresponds to an alternative specification. A more general version would be: $$ C_i(Q_i)=FC_i+a_{1,i}Q_i+a_{2,i}Q^2_i. $$ This specification allows ...
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  • 2,562
2 votes

Composition of EEX energy prices

They don't include anything. It is the pure price for 1 MWh. Edit. The producers have been paid the tariffs, which lowers their short run marginal costs quite a lot. There has not been added any ...
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  • 835
2 votes
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Principal Components Analysis in Economic analysis

I know this is a old post, but since I found it and I know the answer I might as well share it. I would go further than the first component, but it also depends on how much of the variance is ...
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2 votes

What are the implication of state-run oil production vs. private production from leases?

Like many international markets, the crude oil market is a mix of private and public participants. From most perspectives, it really doesn't matter whether oil production is state-run or run by ...
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  • 8,002
2 votes
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Energy saving technology and energy service price

A problem with using energy service prices is that they might reflect competition conditions (e.g. monopoly/oligopoly, or the big six in the UK) rather than the true cost of energy to firms. A ...
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  • 8,437
2 votes

Are risk-costs a form of external costs?

In the particular case of nuclear power plants, yes, the risk cost can be considered as a negative externality. That's because nuclear power plant operators are explicitly limited by law in their ...
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  • 8,002
2 votes

Are there any drawbacks to a hypothetical climate policy?- Carbon tax for reducing Income tax

I think it's broadly a good idea; but as you've asked specifically for the downsides, here you are: Having a steadily increasing carbon tax can actually accelerate the rate of investment in fossil ...
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