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International Energy Markets

Since economics is the science of optimization under scarcity, it is a valuable tool to help us do so. Thus, the major goal of this text is to develop the economic fundamentals and technical and institutional knowledge needed to implement sound economic, business, and government policy decisions relating to energy industries.

Energy originates with the four fundamental forces of physics:

  • Gravity, which holds the universe together.

  • Electromagnetism, which is the attraction between oppositely charged particles and repulsion between like-charged particles. The electromagnetic force is transmitted by photons, which sometimes act like packets and sometimes like waves. From longest to shortest wavelengths, electromagnetic waves are radio, micro, infrared, light, ultraviolet, X-rays, and gamma rays. The shorter the wavelength, the higher the energy carried per photon. The electromagnetic force holds the atom together and is responsible for chemical reactions.

  • Weak nuclear force, which governs radioactive decay. During radioactive decay, neutrons break into protons, electrons, and antineutrinos. The weak nuclear force is transmitted by vector bosons with positive, negative, and neutral charges

  • Strong nuclear force, which holds the nucleus of the atom together. Energy is liberated when this force is broken by separating elements heavier than iron (fission). When this force is exploited to fuse together elements lighter than iron (fusion), energy is also liberated. However, separating lighter elements or fusing heavier elements than iron requires an input rather than a release of energy.

These four forces generate commercial energy in six familiar forms.

  • 1.

    Mechanical energy is associated with motion. Falling water resulting from gravity can turn a grinder, wind resulting from temperature differentials can turn a wind turbine, and human and animal power can be used to move objects fueled by the chemical reaction of food.

  • 2.

    Chemical energy is released when molecular bonds are broken or changed as in the combustion of fossil fuels––coal, oil, and natural gas. Such chemical energy may be turned into mechanical energy as in the internal combustion engine.

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