ECON 3067:Energy Economics I

Pre-Requisites: ECON 2000

This course introduces students to the Economics of Energy at the micro level. It will cover themes such as:
• the demand for and supply of renewable and non-renewable energy , i.e. fossil fuels (viz. crude oil, natural
gas, coal ), electricity and renewables. In terms of supply, the course will cover the issues associated with the
exploration, production, transportation, processing or refining and marketing of fossil fuels and production
of renewable energy
• Energy pricing and markets ,
• Introduction to Energy and the Economics of the Environment

Purpose of the Course

It is designed to introduce students to:
• basic energy issues, and to allow them to better understand the energy business
• the tools required for energy analysis and provide its microeconomic foundations

Instructor Information

Name of instructor(s)- Michael John

Phone (M): 771-0904

E-mail address : Michael.john@sta.uwi.edu,

Office hours: T.B.A

Communication policy – preferred method of contact - E-mail

Goals/Aims
To provide students with the analytical tools to facilitate the overall understanding of the energy sector

General Objectives
At the end of the course students should:
• Have a greater awareness of the micro issues associated with energy
• Appreciate the critical contribution of energy to our domestic economy
• Appreciate the role of the energy industry in the global economy

Themes/Topic and Unit Objectives

Overview and Introduction to Energy Economics

Students should be able to :

• Define Energy Economics
• List factors accounting for the complexity of the energy sector
• List the multi-dimensional interactions energy of the energy industry.

Readings

• Bhattacharyya S.C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag., 2011
Chapter 1

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 • ____________________ Energy Sector Management Issues: An Overview, International Journal of Energy Sector
Management 1(1):13-33.
• Stevens P.J : An Introduction to Energy Economics in Stevens (ed) The Economics of Energy Vol. 1
• Edward Elgar, Cheltenham also Journal of Energy Literature, Vol 6 (2) December 2000 and Vol. 7(1) June
2001.

Unit 1 Introduction to Energy Demand Analysis

Theme - Energy Basics, Energy Data and Energy Balances

Students should be able to :

• Classify the energy on the basis of sources
• List the components of the energy supply chain
• Outline the energy accounting framework
• List components of a country’s Energy Account ,
• Analyze energy balances
• Use energy conversion factors,
• Identify energy balance entries requiring special treatment or information

Readings

• Bhattacharyya S.C: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 2
• IEA(2004) Energy Statistics Manual http://www.iea.org/stats/docs/statistics_manual.pdf
• Karbuz, S Conversion Factors and Oil Statistics, Energy Policy; Jan 2004, Vol. 32 Issue 1, 41-45

Energy Demand Analysis

Students should be able to :

• Trace the evolution of demand analysis,
• Differentiate the economic foundations of
a) consumer energy demand from
b) producer energy demand,
• List alternative approaches for energy demand analysis
• Organize demand into sectoral components
• Evaluate leading selected demand models

Readings

• Bhattacharyya, S.C: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 3-4
• Bhattacharyya, S C. and Timilsina, G R. Energy demand models for policy formulation : a Comparative Study of Energy Dem
Models, World Bank Policy Research Working paper WPS 4866 (2009)
• Bhattacharyya, S C. and Timilsina, G R. A Review of Energy systems models International Journal of Energy
Sector Management 4(4) 2010, 494-518
• EIA : Model Documentation http://www.eia.gov/tools/models/models.cfm
• IAEA Model for Analysis of Energy Demand, www. ub.iaea.org/MTCD/publications/PDF/CMS 18_web.pdf
2006
• IEA , World Energy Model http://www.worldenergyoutlook.org/docs/weo2010/World_Energy_Model.pdf
• SEI Long range Energy Alternatives Planning System (LEAP) http://sei-us.org/Energy Modeling
• Ryan, David L and Plourde Andre : Energy Demand Models and Modelling, Canadian Building Energy End-use
Data and Analysis Centre, April 2008
,http://www.cbeedac.com/publications/documents/energydemand_002.pdf

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Demand Forecasting

Students should be able to :

• List approaches to demand forecasting

• Evaluate the different approaches to energy demand forecasting

Readings

• Bhattacharyya, S.C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 5
• Mehra M, Bharadwaj A. (2000) Forecasting the Demand for Electricity
http://www.teriin.org/upfiles//pub/papers/ft30.pdf
• Shell Scenarios: An Explorer’s guide http://www-static.shell.com/static/public/downloads/brochures
/corporate_pkg/scenarios/explorers_guide.pdf
• Swisher et al : Tools and Methods for Integrated Resource Planning ;Improving energy efficiency and
protecting the environment http://uneprisoe.org/IRPManual/IRPmanual.pdf

Demand management

Students should be able to :

• Define demand side management (DSM),
• Critique the justification for DSM,
• Summarize the concept of Load management,
• Define Energy efficiency,
• List the challenges associated with energy efficiency,
• Identify and discuss the energy saving opportunities,
• Assess the cost effectiveness of energy saving opportunities

Readings

• Bhattacharyya S.C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,2011
Chapter 6
• IEA : Energy Efficiency Governance (2010)
• CSPM Economic Analysis Of Demand-Side Programs and Projects Califonia Standard Practice Manual,
Califonia USA. 2001 http://www.energy.ca.gov/greenbuilding/ documents/
background/07J_CPUC_STANDARD_PRACTICE_MANUAL.PDF
• CRA : Primer on Demand side management, With special emphasis on price responsive programmes Charles
River Associates, Califonia (2005)
http://siteresources.worldbank.org/INTENERGY/Resources/PrimeronDemand-SideManagement.pdf
• EC : GREEN PAPER on Energy Efficiency or Doing More With Less http://eur- lex.europa.eu/
LexUriServ/LexUriServ.do?uri=COM:2005:0265:FIN:EN:PDF
• Swisher et al : Tools and Methods for Integrated Resource Planning ;Improving energy efficiency and
protecting the environment http://uneprisoe.org/IRPManual/IRPmanual.pdf

Unit 2 Supply Economics

Theme
• Energy Investment Analysis

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Students should be able to :
• Explain the main characteristic of energy projects
• Distinguish between Economic and Financial Investment Analysis

Readings

• Asian Development Bank : Key Areas of Economic Analysis of Projects, ADB 2003
• ____________________: Guidelines for the Economic Analysis of Projects , ADB, 1977
• Bhattacharyya S. C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 7-11
• IEA Overseas Investments by Chinese National Oil Companies: Assessing the drivers and Impacts
http://www.iea.org/papers/2011/overseas_china.pdf

Themes: Economics of fossil fuel supply

• Exploration
• Development
• Production
• Fossil fuel production economics
• Resource rents
• Exhaustible Resources and depletion

Students should be able to :

• Explain the activities involved in the non-renewable energy supply system

• Describe the risk involved in exploration projects
• Illustrate the use of decision trees in exploration investment decisions
• Summarize the alternative legal arrangements for resource exploration
• Critique the methods for resource classification
• Distinguish between field level and industry level economics
• Define the concept of resource rent
• Outline the simple model of extraction of exhaustible resources

Readings
• Bhattacharyya S C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 7-11
• Boopsingh, Trevor; Oil and Gas Development – A View from the South 1988 Chap 3,4.
• French Institute for Petroleum Publications; Oil and Gas Exploration and Production. 2001 Chap.3 , 4 and 5.
• Abdel –Al, Hussein and Schmelzlee , Robert K.– Petroleum Economics and Engineering ; An Introduction
1978 Chap, 2,6 and 7
• The Energy Value Chain UTC Investment series Trinidad and Tobago Unit Trust Corporation
http://www.ttutc.com/news/article/energy/value_chain.pdf
• Tordo S. Fiscal Systems for Hydrocarbons, Design Issues, W orld Bank Working Paper No 123
• Tordo S, David Johnston and Daniel Johnston :Petroleum Exploration and Production Rights Allocation
Strategies and Design Issues World Bank Working Paper No. 179
• Otto, James ; et al: Mining Royalties: a Global Study of their Impact on Investors, Government, and Civil Society
(Vol. 1 of 2)
• Van Meurs P. Government Take and Petroleum Fiscal Regime www.krg.org/.../ Government_Take
_and_Petroleum_Fiscal_Regimes__2008_06_30_h14m7s53.doc
• SPE Petroleum Resources Management System Guide for Non-Technical Users,
http://www.spe.org/spe- app/spe/industry/reserves/index.htm
• Historical Facts on the Petroleum Industry of Trinidad and Tobago – GSTT www.gstt.org
• WCI The Coal Resource :A Comprehensive Overview of Coal, World Coal Institute , 2009 Centre for Liquefied
Natural Gas www.lngfacts.org

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 • Natural Gas Supply Association – Natural gas .org- www.naturalgas.org Section 1, 2,5
• Foss, Michelle M: Introduction to LNG, Centre for Energy Economics, University of Texas at Austin
http://www.beg.utexas.edu/energyecon/lng/documents/CEE_INTRODUCTION_TO_LNG_FINAL.pdf

Theme :Refining and Transportation of fossil fuels

Students should be able to :

• Classify refineries
• Evaluate the issues affecting refinery profitability
• Perform simple valuations of crude delivered to a refinery
• Compare and contrast transportation options
• Summarize the operation of the tanker market
• Explain the determination of freight rates

Readings
• Cornot-Gandolphe The Challenges of Further Cost Reductions for New Supply Options (Pipeline, LNG, GTL)
22 World Gas Conference 2003, www.cedigaz.org/Fichiers/pdf_papers/challengesoffurther.pdf.
• Tom Meisner: A Practical Guide to US Natural Gas Transmission Pipeline Economics, Oil and Gas Journal
Research Centre/Penn Energy,2009.
• Pirog, Robert L. :Petroleum Refining: Economic Performance and Challenges for the Future,
Congressional Research Service,˜ The Library of Congress.
http://digital.library.unt.edu/ark:/67531/metacrs7271/m1/1/high_res_d/RL32248_2005May09.pdf
• ______ : Conversion Unit Yield Analysis, 2008 Fuels refinery Performance Analysis, February 17, omon &
Associates http://solomononline.com/documents /Whitepapers/CU_YA_WWW .pdf
• Okimi H. Comparative Economy of LNG and Pipelines in Gas Transmission , World Gas Conference 2003,
Japan http://www.igu.org/html/wgc2003/WGC_pdffiles/10392_1045815366_9772_1.pdf
• Stopford,M. Maritime Economics, Routledge 2nd ed. 2006 Chapters 3 & 4

Theme :Economics of Electricity Supply

Students should be able to :

• Explain the basic concepts related to Electricity Systems

• List the challenges associated with energy efficiency,
• Identify and discuss the energy saving opportunities,
• Assess the cost effectiveness of energy saving opportunities

Readings

• Anderson D. : Electricity Generation Costs and Investment Decisions: A Review UK Energy Research Centre
Working Paper February 2007
• Bhattacharyya Subes C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,201
Chapter 10
• Blyth W.: The Economics of Transition in the Power Sector, IEA Information Paper 2010
• Heptonstall P : A Review of Electricity Unit Cost Estimates, Working Paper UKERC/WP/TPA/2007/006
• IEA : Opportunities to transform the Electricity Sector in Major Economies, IEA, 2010
• Meetamehra. Demand : Forecasting for Electricity
• Turvey R & Anderson D. : Electricity Economics, World Bank July 1977
• Swisher et al : Tools and Methods for Integrated Resource Planning ;Improving energy efficiency and
protecting the environment http://uneprisoe.org/IRPManual/IRPmanual.pdf

Theme: Economics of Renewable Energy

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Students should be able to :
• Identify the renewable energy options available
• Explain the economic issues hindering adoption

Readings

• Awerbuch S. and Saute R. Exploiting the Oil-GDP Effect to Support Renewables Deployment, SPRU Electronic
Working Paper Series 2005 , http://www.awerbuch.com/shimonpages/shimondocs/sewp129.pdf
• Bhattacharyya S. C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 11
• Holmgren, J. et al : Opportunities for Bio Renewables, Hydrocarbon Engineering, June 2007 .
http://www.uop.com/wp-content/uploads/2011/01/UOP-Opportunities-for-Renewables-in-Petroleum-
Refineries-Tech-Paper.pdf
• IEA : Renewable Energy Essentials: Solar heating and cooling,
: Hydropower
: Geothermal Energy (2010)
:Concentrating Solar Thermal power
• _____: Cogeneration and Renewables: Solutions for a Low Carbon Future (2011)
• ______: Clean Energy Progress Report, (2011) IEA.org
• Kaygysuz : The Role of Hydropower for Sustainable Energy Development, Energy Sources Part B (2009)
Taylor & Francis
• Natural Resources Canada : Clean Energy Project Analysis RETScreen Engineering & Cases Textbook, Third
Edition 2005 http://www.retscreen.net/ang/home.php

Unit 3 Energy markets

Students should be able to :

• Trace the evolution of the International Petroleum Industry
• List the major players in the international petroleum market
• Identify the key drivers of energy demand
• Examine the role of OPEC in the petroleum market
• Identify the components of the Natural Gas value chain
• Describe and evaluate the key features of fossil fuel supply contracts (with special emphasis on Natural Gas)
• Appraise the different approaches to Natural Gas Pricing
• Identify the characteristics of the LNG business
• Evaluate the supply/ demand outlook for Crude Oil, Coal , Natural Gas and LNG

Themes: Energy markets

• Energy Pricing
• Energy Taxation
• International oil market
• Anatomy of Oil Prices
• Natural Gas markets
• Electricity Markets
• Introduction to Coal markets

Readings

General
• Bhattacharyya S C.: Energy Economics Concepts, Issues, Markets and Governance, Springer -Verlag 2011
Chapter 12- 16

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 • _________ Determinants of Energy Prices in World Energy Report 2005, RWE, http://www.rwe.com/app/
Mediencenter/Detailansicht.aspx?Mandant=rwe_holding&mID=906&catID=141
• _______ Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative , Joint report
prepared for submission to the G-20 Summit meeting Toronto (Canada) 26-27 June 2010 IEA, OPEC, OECD,
World Bank Joint Report
Coal Markets
• Martin-Amouroux J.M. Coal: The Metamorphosis of an Industry, International Journal of Energy Sector
Management 2(2) 2008 162-180
• Zientara, P.: Polish Government policies for Coal (1989-2006) International Journal of Energy Sector
Management 1(3) 2007 273-294.
• Li, R The Evolution of the International Steam Coal Market, International Journal of Energy Sector
Management 4(4) 2010, 519-534
• ________ Coal and Steel, , World Coal Institute,2009

Gas and LNG

• Stern J and Rogers H Transition to Hub based Gas Pricing in Continental Europe, Oxford Institute for Energy
Studies, 2011
• Rogers, H.V LNG Trade-flows in the Atlantic Basin: Trends and Discontinuities, Oxford Institute for
Energy Studies March 2010
• National Gas Company of Trinidad and Tobago Limited – Gasco News. Special Anniversary Editions 22nd, and
30th.
• Energy Research Associates: LNG in the 21st Century : The First Decade Vol. 1. Executive summary
• EIA The Global LNG Market EIA 2003
• Nazemi ,A New Mechanisms of LNG Pricing in Asia, IGU International Gas Conference 2009
http://www.igu.org/html/wgc2009/papers/docs/wgcFinal00070.pdf
• Chris Holmes C. and Rogers D : The Impact of the Global Economic Crisis on Global LNG Trade,
International Gas Conference 2009 http://www.igu.org/html/wgc2009/papers/docs/wgcFinal00673.pdf
• McGuire, Gregory Understanding Gas Prices Mimeo UWI 2003
• Jensen J T, Development of A Global LNG Market: Is it likely? If so when? Oxford Institute of Energy
Studies, Oxford UK
• Julius De Anne and Afsanah Mashayeki The Economics of Natural Gas: Pricing Planning and Policy Chaps 1-3

Crude Oil
• Bassam Fattouh : An Anatomy of the Crude Oil Pricing System , Oxford Institute for Energy Studies 2011
• ______________Oil Market Dynamics, Oxford Institute for Energy Studies 2010
• “Oil Market Basics” Energy Information Administration <http:/www.eia.doe.gov>
• Daniel Yergin: Its Still the One, Foreign Policy September –October 2009
• BP Statistical Review of World Energy Latest issue, www.bp.com
• McGuire, G. : Crisis and Aftermath – An Assessment of Petroleum Policy in Trinidad and Tobago
1973-80. Chap 4.
• Salameh, Mamdouh G. China’s Global Oil Diplomacy Benign or Hostile IAEE Newsletter Quarter 1, 2010
• Koosh, Victor Market Dynamics can be Challenging Oil and Gas Financial Journal, January 2009
• Jan Hein Jesse and Coby Van Der Linde: Oil Turbulence in the Next Decade ; An Essay on High Oil Prices in a
Supply constrained World., Netherlands Institute of International Relations- Clingendael. June 2008
• World Energy Outlook International Energy Agency Latest Issue.www.iea.org
• _________ Frequently Asked Questions about the Petroleum Industry, Organization of Petroleum Exporting
Countries, www.OPEC.org
• _________ Monthly Oil Market Report Organization of Petroleum Exporting Countries –www.OPEC.org. _________
Annual Energy Outlook ( Latest Issue) Energy Information Administration www.eia.doe.gov

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Unit 4 Energy and the Environment

Students should be able to :

• Identify the various interactions between energy and the environment
• Explain the concept of the Environmental Kuznets curve
• Compare and contrast the options to address energy related environmental problems
• Distinguish between pollution from stationary and mobile sources
• Evaluate the policy options

Readings

Bhattacharyya S C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 23-25

Panayotou T. Economic Instruments for environmental management and sustainable development, UNEP
Paper 16 http://www.conservationfinance.org/guide/guide/images/40_panay.pdf

UNEP Global Environmental Outlook 3, 2002

Shahrin A and Naili A.M.A Introduction to Environmental Kuznets Curve
http://economics.dstcentre.com/Introduction%20to%20Environmental%20Kuznets%20Curve%20By%20A
zmi%20Shahrin.pdf

Assignments
Students will complete three assignments during the semester. The first -an essay provides an opportunity to practice
the analysis of industry issues. The second -a mid-term examination designed to indicate the extent of mastery of the
first half of the course. The final assignment – a problem sheet will provide practice in the simple quantitative issues
covered during the semester

Course Assessment
Assessment is designed to establish the student understanding of the material and the ability to critically energy
matters and issues. Students will be assessed on the following basis:
Course Work 40%
• Course Work Mid-Term Examination : 20 %
• Course Work Essay Unit 3: 10%
• Course Problem Sheet : 10 %

Final Examination: 60 %. This examination will be two and a half hours long and consist of five essay questions of
which students will be required to select three questions.

Teaching Strategies
Students will have three (3) contact hours for weekly.

• Lectures - Wednesday (EU), 8-10 a.m. (FSS 102 W )

• Tutorials- Time to be advised

Lectures will be delivered with the aid of PowerPoint presentations. Student participation will be encouraged and
students are advised to read assigned material before the scheduled class, so that they can participate meaningfully in
the class and tutorial discussion. Tutorial attendance is mandatory i.e. Regulation #189 will be enforced.

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Recommended Resources
Essential Text
Subes C. Bhattacharyya: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011

Other Resources
Stopford,M. Maritime Economics, Routledge 2nd ed. 2006
James G. Speight : Handbook of Petroleum Analysis Wiley-Interscience, 2001
James G. Speight : Handbook of Petroleum Product Analysis Wiley-Interscience, 2002
Richard Seba : Economics of World Wide Petroleum Production
Trevor Boopsingh; Oil and Gas Development – A View from the South 1988
Robert Schmelzlee and Hussein K. Abdel – Petroleum Economics and Engineering ; An Introduction 1978
Natural Resources Canada : Clean Energy Project Analysis RETScreen Engineering & Cases Textbook, Third Edition 2005
http://www.retscreen.net/ang/home.php

Additional Information

Attendance at all lectures and tutorial Classes will be treated as compulsory. University regulations allow for the Course
Lecturer to debar from the Final Examination students who do not attend at least 75% of tutorials. The Course Lecturers will
be enforcing this regulation as well as monitoring attendance at lectures. Students are strongly advised to promptly bring
to the attention of their Tutors/Lecturers evidence of extenuating circumstances that prevent them from attending a tutorial
class/lecture. Evidence of such circumstances will not be accepted at the end of the semester when the list of students to
be debarred in this course is published.

Grading System

MARKS%
GRADE GPA
86 and Over
A+ 4.3
4.0
A 70 -85
67 -69
A- 3.7
63 -66
B+ 3.3
60- 62
B 3.0
2.7
B- 57- 59
53 -56
C+ 2.3
50 -52
C 2.0
47 -49
C- 1.7
43 -46
D+ 1.3
40 -42
D 1.0
0 - 39
F 0.0

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Course Calendar

Date /Week Topic/Lecture Assignment/Exercise Tutorial sheet

Due
Availability

Sept 7 Week 1 1. Introduction to the Energy Economics,

Overview, Understanding Energy Data- From
Measurement to Energy Balances
Sept 14 Week 2 2. Energy Demand Analysis I –Approaches,
Disaggregation, Forecasting,
Sept 21 Week 3 3. Energy Demand Analysis II -Demand Sheet 1 Demand
Management
Sept 28 Week 4 4. Economics of Energy Supply I- Energy
Investment
Oct 5 Week 5 5. Economics of Energy Supply II - Non- Essay
renewable Resource Economics (The
Supply of Fossil Fuels)
Oct 12 Week 6 6. Economics of Energy Supply III Refining and Sheet 2 Supply
Transportation
Oct 19 Week 7 7. Economics of Energy Supply IV Electricity,
Renewable Energy
Oct 26 Week 8 8. Energy Markets I – Pricing and Taxation Sheet 3 Markets

Nov 2 Week 9 9. Energy Markets II The International Oil Mid Term Quiz
Market and the Market for Coal
Nov 9 Week 10 10. Energy Markets III Natural Gas Markets- Sheet 4 Environment
Features, Status, Transportation, Contracts,
Pricing, LNG
Nov 16 Week 11 11. Energy and the Environment I -
Environmental Protection, Pollution-
Stationary and Mobile Sources
Nov 23 Week 12 12. Energy and the Environment II -Climate Problem sheet
Change Economics, Clean Development
Mechanism
Nov 30 Week 13 13. Revision Lecture

Dec 14. Final Examinations

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