The price shocks that affected the oil and gas markets during the 1970s led governments and concerned stakeholders to rethink about the risks associated with uncertain energy supply and the critical role of energy security in economic development. This is the reason why energy economics emerged and developed as a branch of economics beginning in 1973.
Of course, it is worth mentioning that the book “The Coal Question” authored by English economist and logician William Stanley Jevons and published in 1865 marked one of the first attempts to explore the economics of finite sources of energy.
Definition: What is energy economics
Energy economics is a branch of applied economics that involves a multidisciplinary approach to studying the principles and practices concerning the production and consumption, as well as the supply and demand of energy in societies.
Central to energy economics is the application of the principles and tools in economics to analyze the supply and demand of energy, and their relation to and interaction with the economy, specifically economic activity and economic development.
Furthermore, it also examines energy choices and their impact on market performance, the sustainability of the economy, the welfare of the society, and environmental conditions.
Take note that energy economics do not merely employ the concepts and tools in economics, but also principles and practices in natural sciences and engineering, as well as management. Nonetheless, the expansive scope of energy economics makes it an academic discipline, a subject area for academic and professional research, and an actual professional field.
Energy economics as an academic program
Numerous learning institutions, particularly in North America and Western Europe, are offering courses, as well as undergraduate and graduate degrees in energy economics. As a course, energy economics is offered alongside
Some of the notable concepts in economics that are integrated within in energy economics include the law of supply and demand, demand and supply elasticity, consumer preferences or demand shifts, substitutes in consumption, and market structures, among others.
Concepts in business management are also integrated within an energy economics program. These include accounting and finance, marketing, international trade, and procurement or supply chain management.
There are also concepts that are unique to energy economics. These are the structure of energy markets, patterns of energy production and consumption, sources of energy and development of these sources, energy security, and energy policies and regulation.
Energy economics as a professional field
Professionals with an undergraduate and/or graduate degree in energy economics, or any substantial and relevant academic and professional background can pursue a specialized profession and career as an energy economist.
There is an increasing need for energy economists as nation-states and the entire global economy tackle a myriad of issues concerning growing energy demand and the need to promote energy security, economic development, and environmental issues. Furthermore, it is worth noting that the global energy mix has become more dynamic with the further expansion of global hydrocarbon reserves, as well as development and deployment of alternative energy sources such as nuclear power and renewable energies.
Within profit-oriented organizations operating within the energy sector such as energy producers and traders, energy economists work within the realms of strategic management, especially as consultants in charge of market research or business environment scanning, supply and demand planning, and/or as senior managers in charge of energy marketing and trading, and procurement or supply chain management.
Energy economists are also employed in non-profit organizations. Backgrounds in policy and regulation, energy security, economic and environmental sustainability make these professionals subject-matter experts. These professionals essentially land consultancy or advisory roles in non-profit organizations, think thanks, and government agencies.