Tampa Prep 2009-2010 Impact Defense File
AT: Electricity Prices Spikes
Download 2.71 Mb.
|
- Navigate this page:
- Ext 1 – No Impact to Economy
AT: Electricity Prices Spikes1. Markets will self-correct- no risk of any damage to the economy Michaels and Ellig 98 [Robert J. Michaels is professor of economics at California State University, Fullerton, and adjunct scholar at the Cato Institute. Jerry Ellig is senior research fellow at the Mercatus Center, George Mason University., Electricity: Price Spikes by Design?, summer, http://www.cato.org/pubs/regulation/regv22n2/pricespikes.pdf] We believe that the evidence suggests the wholesale electricity market operated with surprising efficiency under difficult circumstances and that regulators should not take the price spikes as evidence of the need for price controls or other guidance. Remarkably, both the Federal Energy Regulatory Commission (ferc) and commissions in the affected states largely agree with us. Unlike their counterparts in the Northeast and West, self-sufficient midwestern utilities traditionally have relied sparingly on market purchases of power. In the extreme conditions of last summer, the market flourished and helped keep the lights on. The reliable supply of electricity depends on complex coordinated networks. The United States is learning that markets can perform much of the necessary coordination. 2. High electricity prices are inevitable - volatility has emerged because of flawed structure and lack of information on consumption Journal of Property Management 01 [A periodical from Chicago, Illinois on property management., A new energy economy: Valuing information, Mar/Apr, http://findarticles.com/p/articles/mi_qa5361/is_200103/ai_n21470037?tag=content;col1] Market volatility. A distressingly high degree of volatility has emerged in the commodity markets in response to growing regional disparities in supply and demand for both electricity and natural gas. In the case of California, volatility and concern has risen as a result of an incomplete and/or flawed deregulatory structure. Marketers and utilities attempt to protect themselves from this volatility through risk management (hedging) and other forward-pricing strategies and by offering their customers value-- added services and products. This is why many utility companies now offering telecom and broadband services, energy audits and conservation incentives, customer assistance centers, and electronic bill presentation and payment. If they possess the necessary information about their consumption, energy users can dampen some of their exposure to price volatility by better defining supply contract terms and by implementing load-- management strategies, such as demand aggregation (buying pools) or onsite (distributed) generation. Ext #1 – No Impact to EconomySpikes don’t change anything and the markets behave normally regardless Michaels and Ellig 98 [Robert J. Michaels is professor of economics at California State University, Fullerton, and adjunct scholar at the Cato Institute. Jerry Ellig is senior research fellow at the Mercatus Center, George Mason University., Electricity: Price Spikes by Design?, summer, http://www.cato.org/pubs/regulation/regv22n2/pricespikes.pdf] Within the spike days, prices behaved competitively. Low demand and plentiful transmission in off-peak hours produced prices below $15/MWh on the spike days, the same as before and after the spike days. Onpeak, a confidential survey of power marketers by Tabors Caramanis and Associates (tca) showed a normal intraday pattern, rising with the sun and cresting prior to the late afternoon peak for deliveries to be made in the following hours. In a given hour, the risks of shortfalls (which can cause systemwide outages) and the uncertainty about transmission produced large differences between reported high and low prices. Both high and low prices, however, showed the same pattern over the day. Electricity price spikes are absorbed by the economy and have little chance of allowing the prices of energy to soar Poole 07 [William, President, Federal Reserve Bank of St. Louis, Energy and the U.S. Macro Economy, July 24, http://www.stlouisfed.org/news/speeches/2007/07_24_07.html] In contrast, the real price of coal fell steadily from 1976 to 2003 and has since risen only slightly. In 2006, the real price of coal was less than half of its 1982-4 value. The real retail price of gasoline has increased continuously since 2003, but in 2006 exceeded the average price of 1982-4 by only 12 percent. The relative price in 2006 is roughly 10 percent below its historical high reached in 1981. The real price of electricity fell by about 35 percent from the early 1980s until 1999, leveled off, and has increased about 12 percent since 2003. Nevertheless electricity remains 23 percent cheaper in real terms than it was on average during 1982-4. As painful as recent energy price increases have been, this historical perspective helps us to understand why the economy has been able to absorb the price increases with little effect on the aggregate economy. Perhaps the most direct way to understand the impact of energy prices on consumers is to examine the fraction of household budgets devoted to energy. After 1981, the share of consumer expenditures on energy out of nominal disposable personal income trended downward, from a high of over 8 percent to about 4.1 percent in 1998 (see Figure 6). Disposable personal income, by the way, is essentially all household income including transfers such as Social Security benefits less direct taxes, which are mostly income taxes. Real disposable personal income is the nominal or dollar amount adjusted for changes in the general price level. With the increase in energy prices documented in Figures 2 and 3, the energy share of disposable personal income rose from 4.1 percent in 1998 to almost 5.8 percent in 2006. This increase simply returns the share to about its 1985 level. It is important to recognize, however, that the increase in energy prices, though of limited impact in the aggregate, has forced difficult choices on lower-income households for whom the burden has been much higher as a proportion of income. The recent price increases are having the expected negative impact on the quantity of energy consumed, relative to total goods and services consumed, but the total amount spent on energy has nevertheless increased. The increase in the energy share of nominal disposable personal income reflects the inelastic short-run demand for energy by consumers. Put another way, as energy prices have surged, the quantity of energy consumed has grown more slowly than real disposable personal income but not slowly enough, given the price increases, to prevent the amount spent on energy from rising significantly. Spikes don’t cause inflation Humpage and Pelz 03 [Owen F. Humpage is an economic advisor at the Federal Reserve Bank of Cleveland. Eduard Pelz was recently a senior economic research analyst there., Do Energy Price Spikes Cause Inflation?, Apr 1, http://www.clevelandfed.org/research/commentary/2003/0401.pdf] Many people mistakenly believe that a sharp rise in the price of energy is necessarily inflationary. They fail to understand that energy prices adjust to the demand and supply of energy, whereas inflation responds to the demand and supply of money. This Economic Commentary explains that the Federal Reserve can do nothing about relative energy prices, but it can determine how relative energy price shocks are reflected in the overall level of prices. Over the last 20 years, the inflationary consequences of energy price shocks, while significant, have been fairly subdued. Socks don’t cause economic collapse- their ev assumes 20 years ago- recessions would at least be mild Humpage and Pelz 03 [Owen F. Humpage is an economic advisor at the Federal Reserve Bank of Cleveland. Eduard Pelz was recently a senior economic research analyst there., Do Energy Price Spikes Cause Inflation?, Apr 1, http://www.clevelandfed.org/research/commentary/2003/0401.pdf] Our model suggests that the impact of energy price shocks on the U.S. economy— both on prices and output—has not been very dramatic over the past 20 years. Prior to the early 1980s, energy prices apparently had a profound effect on business cycle activity. In 1983, for example, economist James Hamilton noted that energy price spikes preceded nearly every U.S. recession since World War II, and he verified this relationship statistically. More recently, however, the connection between energy price spikes and business cycle patterns has seemed less certain. By 1996, Mark Hooker could find little evidence of a relationship. Although energy price spikes preceded the two recent recessions, the downturns were conspicuously mild (see figure 1). Increased energy efficiency may be the most obvious reason that energy price spikes have less of a macroeconomic impact. According to Energy Department estimates, we now consume only half as many Btu of energy per unit of GDP as we did in early 1970s (see figure 2). Conservation should dampen both the business cycle consequences and the inflation impact of energy price hikes. (We did attempt to control for energy efficiency in our model.) Directory: files -> documents documents -> North Mankato Taylor Library documents -> In the Red and Brown Water documents -> - documents -> I. Disaster Summary Sheet II. Tropical Cyclones documents -> Cbp and Trade Automated Interface Requirements Appendix: pga december 22, 2015 documents -> Ace abi catair customs and Trade Automated Interface Requirements documents -> Ace abi catair customs and Trade Automated Interface Requirements documents -> Mobile audio/video recording systems documents -> Cartographic Concepts for Realizing a Location Based umts service documents -> 1/ Background Statistics Human development index rank Download 2.71 Mb. Share with your friends:
|