Econ 332: Natural Resource Economics

One of the topics my group is planning on looking into for the project is the scarcity of fuel in Nigeria. In recent news, Nigeria, Africa’s biggest exporter of petroleum, has been experiencing a major shortage of fuel in terms of production for use by its citizens. A lot it is because of fuel subsidies. The Fuel importers are seen to be more powerful than the Nigerian government as in 2011, the government agreed to spend $1.6 billion to subsidise the fuel however at the end of the year, $15 billion was expended. This shows how weak at the knees the Nigerian government can be when dealing with money. That said, the fuel scam, one of the largest heists in Nigeria’s history, also prompted harsh realisations about corruption. Corruption has been in place in Nigeria since anyone can remember and it is not helping any cause especially in the case of fuel. If the scarcity continues, the entire country of Nigeria will be on a standstill with banks, tv stations, and even airlines shutting down. The crisis is a very serious one and needs to be addressed through a number of different policies that my group will delve much more deeply into if this topic is chosen.

http://www.cnn.com/2015/05/27/opinions/nigeria-fuelscarcity-op-ed/

Saudi Arabia and Russia, the two biggest oil-exporting nations in the world, reached a deal on Tuesday to freeze their production at their current record-high levels of production. This deal is meant to prop up the price of oil, which is at its lowest level in over a decade. However, the deal is contingent on getting other nations to join the deal; while Qatar, Venezuela, and Kuwait have conditionally joined the pact, Iran has recently had sanctions lifted on its oil exports, and has pledged to ramp up their production instead of cap it. The Iranians believe that they have no obligation to join the pact, because their oil exports need to “catch up” with other producing nations. “Our situation is totally different to those countries that have been producing at high levels for the past few years,” a senior source familiar with Iran’s thinking told Reuters. Thus, to make the deal sweeter for Iran, it is expected that the other nations will allow Iran to significantly up their output, but not to pre-sanction levels. It will be interesting to see what happens, as the news has not generated a spike in the price of oil because investors are unsure of the deal’s outcome or effectiveness in boosting prices.

This relates to our class discussion in a number of ways. While our conversation on the socially optimal rate of resource use did not mention international equity, that is exactly what these nations are trying to accomplish. However, there is certainly no concern about scarcity or “Peak Oil”; in fact it is universally accepted that there is a glut of oil on the market. To me, however, this situation shows the effect of competition on the market: prices will continue to slide unless these nations can ALL agree to limit production; if one nation (Iran in this case) “cheats” and continues to pump out oil, the producers will continue to lose money. However, this shows how important competitive markets are for consumers, as lower prices enable consumers to invest or consume in other goods or capital that they otherwise would not be able to.

http://www.reuters.com/article/oil-meeting-idUSKCN0VP01M

Online as of June 19th, 2015, the Solar Star I and II power plants in Kern and Los Angeles Counties California deliver an estimated energy capacity to power 255,000 homes and are some of the largest solar operations in the country and world. The Solar Star power plant has a maximum capacity of 579 MW, took about three years to construct, and created approximately 650 construction jobs for 3 years. The article states that “…more than 570,000 tons of carbon dioxide will be avoided annually – the equivalent of removing over 2 million cars form the road over 20 years.” An interesting aspect of construction is that each individual MW of energy is contained in a pre fabricated unit that can be shipped easily and replaced without major disruption of the other groups of cells. The designers also claim this architecture will use less water compared to previous designs, up to 90% less. So far it has been seen as a big positive for the local communities now relying on the created energy. Advantaging the natural desert landscape with a clear sky and frequent days of high sun intensity is common in this area. Several other operations of solar plants are already employed in the area.

http://cleantechnica.com/2015/06/26/largest-solar-plant-planet-earth-solar-star-comes-online/

Jimmy Robertson

http://seekingalpha.com/article/3356775-the-keystone-state-is-the-key-to-the-future-of-coal

My group is thinking about doing our research project on the future of coal, namely in Pennsylvania. The largest deposits of bituminous and anthracite coal are found in eastern and western coal, respectively. There is enough coal in these deposits to sustain our current level of energy production for another 200 years. The problem is, however, by burning all of this coal we will continue to heat the atmosphere unsustainable. The Marcellus shale (also known as Pennsylvania) contains the most dense mineral concentration of coal in the world.

The consumption of coal is directly correlated with the price of natural gas, making the two substitute goods. The future of coal partially hinges on natural gas prices, which hinge on potential legislation passing in both the United States Congress as well as the Pennsylvania State House. Additionally, America is beginning to export higher and higher amounts of coal to developing countries as the energy source’s domestic popularity is decreasing quickly.

There are a couple of things that we know for sure. First, coal is a resource that supplies us with energy needed to sustain our high standard of living. Second, we aren’t going to run out of coal anytime soon (peak coal is predicted as being hundreds of years away). What we do not know is how a variety of factors will impact coal’s future in the next century. The future of coal will be dependent on legislation, popular opinion, alternatives, human population increase and a litany of additional factors. The future of coal will directly impact the future of the Pennsylvania economy.