Common Tragedies

Thoughts on Environmental Economics

Supply and demand

Posted by Daniel Hall on October 9, 2007

There’s an article in the NYTimes today about energy exploration at “the ends of the earth.” There’s lots of interesting info on various extraction technologies, as well some projections on future demand growth. Do read the article.

The article also sums up the economics succinctly:

As global demand soars and prices rise, energy companies are going to the ends of the earth to find new supplies. …

The industry’s new reach is shifting the economics of energy extraction. According to a recent study, discovery and development costs, a key indicator for the industry, tripled from 1999 to 2006, to nearly $15 a barrel. …

These higher costs mean that the industry needs higher energy prices to finance new projects.

A few years of sustained high prices for oil and natural gas have provided the impetus for a new wave of exploration.  Supply and demand work their magic again!

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