The Role of Markets and Investment in Global Energy (original) (raw)

2013, Goldthau/The Handbook

The term "energy markets" is misleadingly simple. True, in a world of 7 billion people, energy is one of the fundamental factors of production, comparable in importance to labor, capital, technology, and commodities in the satisfaction of human needs. Yet, at first look, the energy industry differs from the rest of the economy in four essential ways. The first of these is its capital intensity, the second the endogenous nature of many energy transportation infrastructures and the elements of natural monopoly they often exhibit. The third differentiating feature is the importance of rent and of conflict over rent distribution. Resulting in part from these first three specificities, but also rooted in security concerns, the fourth distinctive feature is the eminent role of the state in the ownership, control, and development of energy resources, with major implications regarding the role of policy, regulation, and geopolitics. In many countries, the role of the state extends to setting prices and conditions for the consumption of, notably, petroleum products and renewable electricity. Let us consider briefly these features before we put forward a political economic framework adapted to the study of energy markets and investment.