Making sense of high oil prices - a conversation with Stephen P.A. Brown

Dollar ; Gasoline ; Natural gas

Running on empty? how economic freedom affects oil supplies

Petroleum industry and trade

Electricity deregulation likely to benefit consumers: later, if not sooner

Electric utilities

Natural resource scarcity and technological change

Nonrenewable natural resources, such as aluminum and crude oil, exist only in fixed amounts on Earth. Consequently, some observers are concerned that natural resource scarcity will eventually limit future economic growth and human well-being. Others remain optimistic that technological change will overcome geophysical scarcity. Brown and Wolk examine the evidence for natural resource scarcity and find that over the past century reliance on free markets has promoted sufficient technological change to overcome geophysical scarcity for most nonrenewable natural resources. Rather than rising--as would result from increased scarcity--the relevant real prices of most nonrenewable natural resources have fallen. Although declines in real prices have moderated since World War II, the authors find little evidence of increased scarcity in the postwar era. Increased reliance on markets during the closing decades of the twentieth century is cause for optimism that these trends will continue in the twenty-first.

Energy prices and state economic performance

Changes in energy prices have had sizable but differing effects on economic activity across the United States. The composition of each state's economy largely determines how its employment responds to changes in energy prices. In this article, Stephen Brown and Mine Yucel use simulations based on input-output analysis to assess the long-term consequences of changing oil prices on employment in each state in 1982, 1992, and 2000. Brown and Yucel find that because state economies are becoming more similar in their composition, the variation across states in the response to changing oil prices is narrowing. The authors' findings suggest that the grounds for regional divisions in the debate over national energy policy have lessened since the early 1980s and will continue to do so throughout the remainder of the 1990s.Power resources - Prices ; State finance

Protecting social interest in free invention

Intellectual property

Oil prices and U.S. aggregate economic activity: a question of neutrality

Considerable research finds oil price shocks have had major effects on U.S. output and inflation. Several recent studies argue that the response of monetary policy-rather than the oil price shocks themselves-caused the fluctuations in economic activity. Stephen Brown and Mine Yucel show that an oil price increase will lead to a decline in real GDP and an increase in the price level that are of a similar magnitude if the federal funds rate is unconstrained-a finding consistent with the definition of monetary neutrality in which nominal GDP is constant. Brown and Yucel also find that holding the federal funds rate constant in the face of an oil price increase is an accommodative policy that boosts real GDP, the price level, and nominal GDP. In short, the monetary authority can use accommodative policy to cushion the negative effects of higher oil prices on real GDP, but at the expense of higher inflation.Power resources - Prices ; Gross domestic product ; Inflation (Finance)

Some implications of increased cooperation in world oil conservation

Petroleum industry and trade

Some implications of increased cooperation in world oil conservation

In this article, Stephen Brown and Hillard Huntington combine recent studies of world oil markets and the nascent literature on damage estimates from carbon dioxide (CO2) emissions to derive cost and benefit curves for the reduction of these emissions through cooperative programs of oil conservation. Their analysis shows that the desirability of extending cooperation in global energy conservation policies is essentially an empirical issue rather than a conceptual one. The current evidence suggests that over the next two decades, the Organization for Economic Cooperation and Development will have an incentive to reduce its oil consumption and the associated CO2 emissions by more than is optimal from a world perspective. During this period, extending cooperation to the oil-importing developing countries may push oil conservation too far.Petroleum industry and trade

Deliverability and regional pricing in U.S. natural gas markets

During the 1980s and early '90s, interstate natural gas markets in the United States made a transition away from the regulation that characterized the previous three decades. With abundant supplies and plentiful pipeline capacity, a new order emerged in which freer markets and arbitrage closely linked natural gas price movements throughout the country. After the mid-1990s, however, U.S. natural gas markets tightened and some pipelines were pushed to capacity. We look for the pricing effects of limited arbitrage through causality testing between prices at nodes on the U.S. natural gas transportation system and interchange prices at regional nodes on North American electricity grids. Our tests do reveal limited arbitrage, which is indicative of bottlenecks in the U.S. natural gas pipeline system.Natural gas ; Arbitrage ; Pricing