Market Failures and
Abiotic Resources

AND MINERALS

Are These Market Goods?

How Important are Fossil Fuels?

Essential to modern civilization?

Simultaneous with market economy
 More than 20,000 hours of work in a barrel of oil
 Extremely high energy return on energy invested
 Science or faith in markets?

Supply and
Demand for
Oil

Supply Curve Now

Supply Curve Over Time

Does Supply Respond to Price?
Oil production and oil prices from 2003 to 2010. Oil prices more than tripled between January, 2005 and July, 2008, while total production increased by less than 3%.

Does Price Respond to Supply? i.e. do Prices Reflect Scarcity?

Energy Per Capita in the US

What’s the Demand Curve Look
Like?

Demand for essential, non-substitutable resources

What are the implications for marginal analysis?

What are the implications for GNP?

Supply w/ subsidy
As Oil Industry Fights a Tax, It Reaps Subsidies

What Costs are Missing?

Negative Externalities = degradation of public goods

What are some of the externalities?

How serious are they?

Are they affecting things that are essential?

Are they affecting things with no substitutes?

How long do they last?

What is more essential and non-substitutable, fossil fuels or the things they degrade?
 At what spatial scales do they occur?
 At what temporal scales?

Is this an accurate depiction of MEC?

User Cost: The Value Arising from Scarcity

What would be a fair price for oil if it were infinite?

What is the opportunity cost of extracting oil today?
 The concept of RENT (royalties) and VCAT

How Big is the Energy
Challenge?

What is current energy usage?
 What will it be by 2050?

What percent is fossil fuels?

How much do we need to reduce carbon emissions to stabilize the climate?

What are the alternatives?
 What do we need to produce them?

Are the alternatives market or non-markets?
 How much energy can we get from them?

What do we do?

Supply and Demand for Fossil
Fuels
Marginal costs fosssil fuel use
(supply curve)
Marginal benefits of fossil fuel use
(demand curve)
Fossil fuel use/anthropogenic CO
2 emissions