Donny Tedjo Blog

Sunday, October 09, 2005

Rising Fear

Rising_fear "..the world can, in effect, get along without natural resources ... at some finite cost, production can be freed of dependence on exhaustible resources altogether... "
[ 1974 Robert Solow]
His briliant theory saying as follow:
The present value of a resource in the ground is based on the discounted value of all future sales. The owner is indifferent whether to mine more if the net price (market price minus marginal extraction costs) increases at the interest rate over time, and will produce as much as can be sold at that price. If the producer expects its price to rise faster than the interest rate, it's worth more to leave it in the ground and produce later. Energy_outlook_1 Energy_outlook_2

That was his thought, but I have my own thought.
The present value of fuel in Fuelstation is based on recent exchanges rates and recent local prices.The net price increase at the interest rate of future exchanges rates + future international market price, If you expecting the inflation rise faster than banknote interest rate, it's worth for to dump every single gallon right now before the Winter time hits the other part our Hemisphere in 2006.In cases of worlwide economic downturning, it's better you eat your banknote right now because it have no worths

Back to our highschool physic class.
How much callorie is needed to boiled 1 litre watter at your geographical g-forces condition => how much the callories cost to boilled the watter at recent energy price.
Energy saving or effecienty factor to boilling water could made by high pressure atmospher, ie. closed top => to build/investing in capacity could also be made under high pressure interest rate, as well as time when economical interest of energy investing still lower than energy returning; both type of investment cost just differ in forms ones valuating in money ones valuating in energy.

So the wealth of nation could be measure from the energy they consumpt if only the energy could assumed as money returning more energy they could produced.
People hired people to do works (P) and compensate in money they payed => Country produced goods which consummed energy at cost of local energy price and exporting at exchanges of trade partner in which transport+services actually have been payed from "energy price gap" between both trading partner; on these cases energy resources could be used as competitivenes factors to treating competitior markets.

What when then energy became capital and not more seen as cost factor in production => that was they called as energy-future contract fundings, which common comes use by minning-sectore to financing their exploration; the oil co. presentings the oil-reserve and calculating the investment cost + margin at time lines they issued bonds or any other finance instruments, the security co...underwriter securitized it and sale it top public.
Energy really capital since the price fluctuation could drived more money than the real price of energy at that time they sell.I've been in "Saarland-the german france border" and little bit understand how the electric co. there buy-sale energy on spot under and transffering to their grid system before other parts of region need it.

That was the way of energy economy works and how their effect on GDP as a whole system; if you could conditioning/changes your view to look energy as money, it's could also changes slowly the way you used energy.

Happy Monday