Figure 2. SOURCE: Alliance of Automobile Manufacturers (2000)

Energy economics is the application of economics to energy issues. Central concerns in energy economics include the supply and demand for each of the main fuels in widespread use, competition among those fuels, the role of public policy, and environmental impacts. Given its worldwide importance as a fuel and the upheavals in its markets, oil economics is a particularly critical element of energy economics. Other efforts have treated natural gas, coal, and uranium. Energy transforming and distributing industries, notably electric power, also receive great attention. Energy economics addresses, simultaneously as well as separately, both the underlying market forces and public policies affecting the markets.

Economic concerns differ sharply from those of natural scientists and engineers. The most critical difference is in the outlook towards supply development. Many economists argue that market forces allow smooth adjustments to whatever happens to the...