Free Slides from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Technology, Environment, and the Future of  Natural G...
A New Focus on Natural Gas <ul><li>Natural gas has long been one of America’s leading domestic energy sources </li></ul><u...
The Role of Technology <ul><li>Technology is part of the reason. New methods have increased production of “unconventional”...
How Does Technology Affect the Market? <ul><li>How does new technology affect the supply and demand for natural gas? </li>...
The Effect of Technology (Answer) <ul><li>New technology reduces production cost and shifts the supply curve to the right,...
Low Carbon Content Helps Drive Demand <ul><li>Concern about climate change has also been a factor in the rising popularity...
How does low carbon content affect the market? <ul><li>Starting from price P 2,  how do incentives and regulations that en...
The effect of low carbon content (Answer) <ul><li>Pressure to switch to low-carbon fuels shifts the demand curve to the ri...
The result so far: A net decrease in gas prices <ul><li>Other things being equal, the technology-driven shift in supply te...
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Technology, environment, and the future of natural gas

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Technology, environment, and the future of natural gas

  1. Free Slides from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Technology, Environment, and the Future of Natural Gas Posted Feb 24, 2010 Terms of Use: You are free to use these slides as a resource for your economics classes together with whatever textbook you are using. If you like the slides, you may also want to take a look at my textbook , Introduction to Economics, from BVT Publishers . Check Ed Dolan’s Econ Blog regularly for more slides like this.
  2. A New Focus on Natural Gas <ul><li>Natural gas has long been one of America’s leading domestic energy sources </li></ul><ul><li>In the 1980s, gas production slipped to third place behind oil and coal </li></ul><ul><li>Now it is making a comeback—by the end of 2009, it was in a virtual tie with coal, and rising fast </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
  3. The Role of Technology <ul><li>Technology is part of the reason. New methods have increased production of “unconventional” gas from sources once thought impractical to tap </li></ul><ul><ul><li>Methane from coal beds </li></ul></ul><ul><ul><li>Gas from shale formations </li></ul></ul><ul><ul><li>Tight gas from hard rock formations </li></ul></ul><ul><ul><li>Gas from very deep wells </li></ul></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
  4. How Does Technology Affect the Market? <ul><li>How does new technology affect the supply and demand for natural gas? </li></ul><ul><li>Does the demand curve shift? If so, show the new demand curve as D 2 </li></ul><ul><li>Does the supply curve shift? If so, show the new supply curve as S 2 </li></ul><ul><li>Show the new equilibrium price as P 2 </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
  5. The Effect of Technology (Answer) <ul><li>New technology reduces production cost and shifts the supply curve to the right, from S 1 to S 2 </li></ul><ul><li>The demand curve does not shift </li></ul><ul><li>The market moves along the demand curve to a new equilibrium at P 2 </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
  6. Low Carbon Content Helps Drive Demand <ul><li>Concern about climate change has also been a factor in the rising popularity of natural gas </li></ul><ul><li>Natural gas produces significantly lower carbon emissions per unit of energy produced (Btu) than do other major fossil fuels </li></ul><ul><li>New regulations and incentives encourage use of natural gas </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
  7. How does low carbon content affect the market? <ul><li>Starting from price P 2, how do incentives and regulations that encourage low-carbon fuels affect the market? </li></ul><ul><li>Does the demand curve shift? If so, show the new demand curve as D 3 </li></ul><ul><li>Does the supply curve shift? If so, show the new supply curve as S 3 </li></ul><ul><li>Show the new equilibrium price as P 3 </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/
  8. The effect of low carbon content (Answer) <ul><li>Pressure to switch to low-carbon fuels shifts the demand curve to the right, from D 1 to D 3 </li></ul><ul><li>The supply remains at S 2 </li></ul><ul><li>The market moves along the supply curve S 2 to a new equilibrium at P 3 </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/ Question: How do we know whether gas prices will rise or fall when both the supply and demand curves shift to the right?
  9. The result so far: A net decrease in gas prices <ul><li>Other things being equal, the technology-driven shift in supply tends to push the price of gas down </li></ul><ul><li>Other things being equal, increased demand for low-carbon fuel tends to push the price of gas up </li></ul><ul><li>In the recent past, the supply curve has shifted by more than the demand curve, and gas prices have trended downward </li></ul><ul><li>If economic recovery speeds growth of demand, a stronger demand shift could cause gas prices to rise again </li></ul>Posting P100226 from Ed Dolan’s Econ Blog http://dolanecon.blogspot.com/

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