Wednesday homework

1) What are the most powerful driving forces behind the demand for energy?

These are mostly the World's largest economies. By the 2030 China will have been the fossil fuels boggest consumer. Other highly industrialized countries, such as US or India will also need more energy, which naturally increases the demand. 

2) Why does the report forecast virtually no increase in energy demand in developed countries? What assumptions are made about growth rates in OECD and non-OECD countries?

That is because population and income growth are the two most powerful driving forces behind the demand for energy. The OECD countries populations virtually do not grow, and the income growth slows down. Additionally, the OECD countries promote a "green" lifestyle, which is all about saving the energy. 

3) What factors would lead to a substitution of sustainable energy sources for fossil fuels? What would detrmine the size of such substitution?

Since the fossil fuels are non-renewable and constantly become more expensive, people try to find some alternative sources of energy. That is why the wind, solar, bio-fuels and other renewables continue to grow strongly, increasing their share in primary energy from less than 2pc now to a projected level of more than 6pc by 2030. Biofuels will provide 9pc of transport fuels, and nuclear and hydropower will grow steadily and gain market share in total energy consumption.

4) What is the role of the price elasticity of demand for and supply of oil and the income elasticity of demand for oil in determining oil consumption in different parts of the world?

5) Why may high energy prices not necessarily mean ‘doom’? 

Because a high price of the energy can rationalise the demand, create an innovation and drive both efficiency and investment in new sources of supply.