Oil, Natural Gas and Economics: A Primer

Jul 12, 2004


Jerry Ellig, Ph.D.
Mercatus Center, George Mason University 

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Click Here to read PDF file. 

Over the past couple of years, rising gasoline and natural gas prices have been hitting everyone in the pocketbook.  Combined with the inability of the administration and congress to pass a comprehensive energy bill, it is certain that energy prices will become a campaign issue this fall. 

Frustrated policymakers have proposed various short-term solutions such as releasing oil from the US strategic petroleum reserve or setting price caps to control prices.  Others have suggested that the government should "incentivize" industry to develop alternative energy sources and give oil companies greater access to public lands for exploration.  But in order to understand the long-term viability of these proposals, congressional staffers must have a firm grounding in the economic fundamentals that govern energy markets.

Because the economics of energy markets can be complicated, and it is difficult for policymakers to know which efforts may bring the greatest benefits to consumers, the Mercatus Center at George Mason University is sponsoring a seminar for congressional staff with responsibility over energy issues.  Key questions we will address include:

  • How have the deregulated oil and gas production industries responded to price shocks?
  • What are the implications of recent energy price increases for the performance of the U.S. economy?
  • Are today's gasoline and natural gas prices high by historical standards?
  • Have oil prices increased internationally as much as they have increased for the United States?
  • What questions should policymakers ask when assessing energy policy proposals?

Seminar participants will leave with a framework for understanding the dynamics of energy markets and a greater ability to evaluate policy options that cross their desks.