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A Smart Energy PolicyAn Economist's Rx for Balancing Cheap, Clean, and Secure Energy$
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James M. Griffin

Print publication date: 2009

Print ISBN-13: 9780300149852

Published to Yale Scholarship Online: October 2013

DOI: 10.12987/yale/9780300149852.001.0001

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The End of Cheap Oil?

The End of Cheap Oil?

(p.30) Chapter 2 The End of Cheap Oil?
A Smart Energy Policy

James M. Griffin

Yale University Press

This chapter focuses on whether markets can be trusted to provide cheap energy. Both the organization of the petroleum exporting countries (OPEC) cartel and its predecessor, the Seven Sisters, found that the ability to set prices and extract monopoly profits was undermined by a variety of market forces ranging from unexpectedly large long-run consumer responses, to higher oil prices, to unanticipated growth in non-OPEC oil production, to the difficulties of reining in cheaters within the cartel. The long-run forces that work so well in oil markets are never realized in a government-managed system. Markets are the only viable alternative. High oil prices would go a long way toward reducing the conflict between cheap and secure energy, and perhaps between cheap and clean energy as well. A smart energy policy is required that is adaptable to either a high- or low-oil-price world, producing a reasonable balance between cheap, clean, and secure energy.

Keywords:   markets, market forces, OPEC cartel, oil markets, clean energy, energy policy

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