An energy market is a type of
commodity market on which electricity, heat, and fuel products are traded. Natural gas and electricity are examples of products traded on an energy market. Other energy commodities include: oil, coal, carbon emissions (greenhouse gases), nuclear power, solar energy and wind energy. Due to the difficulty in storing and transporting energy, current and future prices in energy are rarely linked. This is because energy purchased at a current price is difficult (or impossible) to store and then sell at a later date. There are two types of market schemes (for pricing): spot market and forward market.
Typically,
energy development stems from a government's
energy policy
Energy policies are the government's strategies and decisions regarding the Energy production, production, Energy distribution, distribution, and World energy supply and consumption, consumption of energy within a specific jurisdiction. Energy ...
which encourages the development of an
energy industry
The energy industry refers to all of the industries involved in the production and sale of energy, including fuel extraction, manufacturing, oil refinery, refining and distribution. Modern society consumes large amounts of fuel, and the energy in ...
specifically in a
competitive
Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...
manner (as opposed to non competitive).
Until the 1970s when energy markets underwent dramatic changes, such markets were characterized by
monopoly
A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
-based organizational structures.
For instance, most of the world's petroleum reserves were controlled by the
Seven Sisters. In the case of petroleum energy trade, circumstances then changed considerably in
1973
Events January
* January 1 – The United Kingdom, the Republic of Ireland and Denmark 1973 enlargement of the European Communities, enter the European Economic Community, which later becomes the European Union.
* January 14 - The 16-0 19 ...
as the influence of
OPEC
The Organization of the Petroleum Exporting Countries (OPEC ) is an organization enabling the co-operation of leading oil-producing and oil-dependent countries in order to collectively influence the global oil market and maximize Profit (eco ...
grew and the repercussions of the
1973 oil crisis
In October 1973, the Organization of Arab Petroleum Exporting Countries (OAPEC) announced that it was implementing a total oil embargo against countries that had supported Israel at any point during the 1973 Yom Kippur War, which began after Eg ...
affected global energy markets.
Liberalization and regulation
Energy markets have been liberalized in some countries. They are regulated by national and international authorities (including liberalized markets) to protect
consumer rights and to avoid
oligopolies. Some such regulators include: the
Australian Energy Market Commission in
Australia
Australia, officially the Commonwealth of Australia, is a country comprising mainland Australia, the mainland of the Australia (continent), Australian continent, the island of Tasmania and list of islands of Australia, numerous smaller isl ...
, the
Energy Market Authority in
Singapore
Singapore, officially the Republic of Singapore, is an island country and city-state in Southeast Asia. The country's territory comprises one main island, 63 satellite islands and islets, and one outlying islet. It is about one degree ...
, the
Energy Community
The Energy Community, commonly referred to as the Energy Community for South East Europe (ECSEE), is an international organization consisting of the European Union (EU) and a number of non-EU countries. It aims to extend the Energy policy of t ...
in Europe (which replaced the
South-East Europe Regional Energy Market) and the
Nordic energy market for
Nordic countries
The Nordic countries (also known as the Nordics or ''Norden''; ) are a geographical and cultural region in Northern Europe, as well as the Arctic Ocean, Arctic and Atlantic Ocean, North Atlantic oceans. It includes the sovereign states of Denm ...
. Members of the
European Union
The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...
are required to liberalize their energy markets.
Regulators tend to seek to discourage price
volatility, to reform markets (if needed) and to both search for evidence of- and enforce compliance against
anti-competitive behavior (such as the formation of an illegal
monopoly
A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
).
Due to the
increase in oil price since 2003 coupled with increased market
speculation
In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable in a brief amount of time. It can also refer to short sales in which the speculator hope ...
, energy markets have been reviewed; and, by 2008, several conferences were organized to address the energy market sentiments of petroleum importing nations. In Russia, the markets are being reformed by the introduction of harmonized and all-Russian consumer prices.
Current and past energy usage in the United States

The United States currently uses over four trillion kilowatt-hours (kWh) per year in order to fulfill its energy needs. Data given by the
United States Energy Information Administration (EIA) has shown a steady growth in energy usage dating back to 1990, at which time the country consumed around 3 trillion kWh of energy. Traditionally, the United States's energy sources have included oil, coal,
nuclear,
renewables and
natural gas
Natural gas (also fossil gas, methane gas, and gas) is a naturally occurring compound of gaseous hydrocarbons, primarily methane (95%), small amounts of higher alkanes, and traces of carbon dioxide and nitrogen, hydrogen sulfide and helium ...
. The breakdown of each of these fuels as a percentage of the overall consumption in the year 1993, per EIA was: coal at 53%, nuclear energy at 19%, natural gas at 13%, renewable energy at 11% and oil at 4% of the overall energy needs. In 2011, the breakdown was: coal at 42%, nuclear at 19%, natural gas at 25%, renewable energy at 13% and oil accounted for 1%. These figures show a drop in energy derived from coal and a significant increase in both natural gas and renewable energy sources.
According to the
United States Geological Survey
The United States Geological Survey (USGS), founded as the Geological Survey, is an agency of the U.S. Department of the Interior whose work spans the disciplines of biology, geography, geology, and hydrology. The agency was founded on Mar ...
(USGS) data from 2006, hydroelectric power accounted for most of the renewable energy production in the United States. However, increasing government funding, grants, and other incentives have been drawing many companies towards the biofuel, wind and solar energy production industries.
Moving towards renewable energy
In recent years, there has been a movement towards renewable and sustainable energy in the United States. This has been caused by many factors, including consequences of climate change, affordability, government funding, tax incentives and potential profits in the energy market of the United States. According to the most recent projections by the EIA forecasting to the year 2040, the renewable energy industry will grow from providing 13% of the power in the year 2011 to 16% in 2040. This accounts for 32% of the overall growth during the same time period. This increase could be profitable for companies that expand into the renewable energy market in the United States.
This movement towards renewable energy has also been affected by the stability of the global market. Recent economic instability in countries in the Middle East and elsewhere has driven American companies to further develop American dependence on foreign sources of energy, such as oil. The long term projections by the EIA for renewable energy capacity in the United States is also sensitive to factors such as the cost and availability of domestic oil and natural gas production.
Countries around the world also face the challenge of up-skilling professionals in order to create the workforce required for the transition from fossil fuel to renewable energy. Organisations such as the
Renewable Energy Institute are assisting with this transition, but more is required to meet targets set by governments around the world, including those set by the
Paris Agreement
The Paris Agreement (also called the Paris Accords or Paris Climate Accords) is an international treaty on climate change that was signed in 2016. The treaty covers climate change mitigation, adaptation, and finance. The Paris Agreement was ...
.
Renewable energy sources
Currently, the majority of the United States's renewable energy production comes from hydroelectric power, solar power and wind power. According to the
U.S. Department of Energy, the cost of wind power doubled between the years of 2002 to 2008. However, since then, the prices of wind power have declined by 33%. Various factors have contributed to the decline in the cost of wind power, such as government subsidies, tax breaks, technological advancement and the cost of oil and natural gas.
Hydroelectric power
Hydroelectricity, or hydroelectric power, is Electricity generation, electricity generated from hydropower (water power). Hydropower supplies 15% of the world's electricity, almost 4,210 TWh in 2023, which is more than all other Renewable energ ...
has been the main source of renewable energy because it has been reliable over time. Nonetheless, there are challenges in hydropower. For example, traditional hydroelectric power required damming rivers and other sources of water. Damming disrupts the environment in and near the water, proximally because the dam necessarily creates a lake at the water source. Other complications may include protest by environmentalists. However, new forms of hydroelectric power that harness wave energy from oceans have been in development in recent years. Although these power sources need further development to become economically viable, they have potential to become significant sources of energy.
[Hydroelectric Power Water Use. (Feb 14, 2013). Retrieved from www.ga.water.usgs.gov.]
In recent years,
wind energy and
solar energy
Solar energy is the radiant energy from the Sun's sunlight, light and heat, which can be harnessed using a range of technologies such as solar electricity, solar thermal energy (including solar water heating) and solar architecture. It is a ...
have made the largest steps towards significant energy production in the United States. These sources have little impact on the environment and have the highest potential of renewable energy sources used today. Advances in technology, government tax rebates, subsidies, grants, and economic need have all lead to huge steps towards the usage of sustainable wind and solar energy today.
In the U.S.
The energy industry is the third-largest industry in the United States.
This market is expected to have an investment of over $700 billion over the next two decades according to selectusa. Furthermore, there are many federal resources enticing both domestic and foreign companies to develop the industry in the United States. These federal resources include the Department of Energy Loan Guarantee, the American Reinvestment and Recovery Act, the Smart Grid Stimulus Program, as well as an Executive Order on Industrial Energy Efficiency. Harnessing the power of wind, solar and hydroelectric resources in the United States will become the focus of the United States's renewable sources of energy.
See also
*
Commodity value
*
Cost competitiveness of fuel sources
*
Demand destruction
*
Energy crisis
*
Energy derivative
An energy derivative is a derivative contract based on (derived from) an underlying energy asset, such as natural gas, crude oil, or electricity. Energy derivatives are exotic derivatives and include exchange-traded contracts such as futures ...
*
Energy intensity
*
Food vs. fuel
*
Renewable energy commercialization
Renewable energy commercialization involves the deployment of three generations of renewable energy technologies dating back more than 100 years. First-generation technologies, which are already mature and economically competitive, include ...
*
Cost of electricity by source
Different methods of electricity generation can incur a variety of different costs, which can be divided into three general categories: 1) wholesale costs, or all costs paid by utilities associated with acquiring and distributing electricity to ...
*
Spark spread
References
External links
UK Energy Wholesale Market Review- Weekly Analysis - Baseload electricity, Peak electricity, Seasonal power prices, Commodity price movements and Wholesale price snapshot
{{DEFAULTSORT:Energy Market
Energy economics