national security Flashcards
why is oil a national security problem
vulnerable strategic import have cost which is not reflected in the market
national security is a public good
embargo
short run: too small q and too high p
long run: economic efficient point
should we be self sufficient
no
vulnerability premium is less than the cost of self-sufficiency because embargo are uncertain and we have strategic reserves
policy alternatives
impact demand, domestic supply, or foreign supply
tax consumption
conservation or tax consumption
shift demand curve down to bring q to efficient point
subsidize domestic production
shift supply curve down
increases domestic quantity
tariff on imports
equal to the distance between Sf and Sw
tariff rate x quantity imported
price and quantity correct
quota on imports
price and quantity correct
box to importers (q2, q4, Sw, Pw)
OPEC’s 4 hypothesis
monopoly - cartel theory
dominant firm
non-profit maximizing model
competitive model
monopoly - cartel theory
assumes OPEC members collude to excursive power over production and price
economic inefficiency
deplete too slow
typical monopoly supply/demand graph
can a cartel survive?
why its not: price elasticity income elasticity non-cartel members compatibility of members interests
if it is a cartel, it breaks apart often
dominant firm theory
fringe acts as price takers
dominant firm takes into account the fringe
residual demand- demand the dominant firm faces after it takes out the supply of the fringe
market demand- fringes supply
competitive fringe supply= horizontal summation
find price: where MC = MR, go up to residual demand and got horizontal across to price
non profit maximizing model theory
OPEC are not profit maximizers, they make production decisions based on their national budgets which are a function of their absorptive capacities
competitive model
OPEC is an unsuccessful cartel and behaves in an essentially competitive fashion
non economic political club
political benefits between members
nuclear and renewable energy benefits
electricity/power deceased pollution: decrease carbon or are carbon neutral and decrease waste sustainable jobs/economic reduced dependence on fossil fuels
nuclear power - non renewable
up to 60000 year supply at present rates
nuclear power costs
long time lag between planning and operation
cost more expensive than wind
weapons proliferation risk
meltdown risk
mining lung cancer risk and other mining issues
carbon-equivalent emissions and air pollution associated with mining and refining
waste risk perception and other
storage options for nuclear waste
spent fuel pool or dry cast
best option:
Yucca Mountain
$15 billion spent - still not in operation
future costs with Yucca Mountain
US govt is contracted to pay $23 billion to private utility companies
each year the govt fails to implement a long term storage solution costs them $500 million
risks with Yucca Mountain
must be designed to leak .15MSV of radiation per year per person
this is 1% of a CT scan
potential transportation accident
why no solution for Yucca Mountain
shut down 2010
NIMBY
hydropower initial cost
initially expensive
- cost of building
- green house gas emissions from building
- most of good sites already used or protected - raises cost to go to a poor site
hydropower environmental cost
flooding large tracts of land
methane
habitat
coastal erosion
animal - primarily fish
reservoir can also change natural water temperatures, water chemistry, river flow characteristics, and silt loads all of which effect ecology
GHG such as CO2 and methane form in natural aquatic systems and in human-made water storage reservoirs as a result of the aerobic and anaerobic decomposition of biomass in the water
solar power costs
5 - 11 times more expensive to produce electricity from the sun than it is from coal, hydropower, or nuclear source although costs are decreasing
- technology is expensive
- energy production only takes pace when sun is shining
- 20-40% efficiency
- maintenance costs
large inexpensive tracts of lands are found far from cities where power is needed
may not be the most profitable use of the land
transmission from solar farm to cities
aesthetic pollution
hazardous waste when decommissioned
wind power costs
decreasing over time
energy production only takes place when windy and some places are not windy enough to be cost competitive
large inexpensive tracts of lands are found far from cities where power is needed
may not be the most profitable use of the land
transmission from wind farm to cities
impacts local wildlife- bats and birds
like all energy sources, wind projects can alter the habitat
waste disposal turbines
biomass power costs
may be more expensive than traditional plants
may be more carbon neutral but does not decrease carbon
may not be the most profitable use of land
use of land to produce fuel stock and not food
seasonality of biomass stock
burning wastes could create high concentrations of metals
