The Big Ideas of 2012: What We Learned About Energy and Finance

 

Between election-year politics, a slew of corporate scandals, and the slow but steady economic recovery, it’s been an up-and-down year for American business.

In the final weeks of 2012, we are taking a look back at some of the biggest ideas that have shaped the discourse of the business world in the last year. This is the third installment of our three-part series.

Five Things We Learned About Energy:

  1. Alternative fuels are in economic limbo. Renewable energy sources — solar, wind, geothermal, and hydroelectric — account for only about 10 percent of U.S. energy consumption. Despite a number of technological advancements, that number is unlikely to rise significantly anytime soon, thanks to low natural gas prices.
  2. The energy outlook is looking brighter. Americans of all political stripes are starting to feel (slightly) more positive about the future of energy. This year, nearly one in four consumers believes energy issues are headed in the right direction, compared to 14 percent a year ago. And 47 percent expect their choices for clean and affordable energy to improve over the next five years, while only 19 percent expect choices to get worse.
  3. It wouldn’t kill us to tax carbon. Congress has shown little interest in adopting a tax on carbon for fear of hindering economic growth, but energy experts say it would be feasible for energy companies to adjust to a tax if it were unrolled gradually.
  4. Nearby oil is stable oil. Importing oil from Canada could make the U.S. less vulnerable to the volatile political climate in the Middle East. But with the Keystone Pipeline project on hold, many American refineries (including those in the Gulf of Mexico region) are having to import more oil from overseas, putting them at risk of price shocks from embargoes.
  5. Fossil fuels are finite. Experts disagree about whether we have already reached the maximum rate of oil production, also known as peak oil. That threshold is determined by a number of technological and economic factors, and if production drops off sharply, there could be major social consequences.

Five Things We Learned About Finance:

  1. Illegal trades harm the economy. Insider trading is a pervasive problem that undermines confidence in U.S. capital markets, thereby raising the costs of capital and retarding economic growth.
  2. Old news is good news. Futures prices in aggregate markets (rather than individual stocks) react strongly to monthly economic reports containing previously released information; however, it would be difficult for an individual investor to reliably profit from this strategy.
  3. New rules fix yesterday’s problems. Federal rulemaking arising from the financial crisis could burden the efficiency of the American financial system for years to come.
  4. Gas prices move globally, not locally. Big oil companies can’t manipulate the oil market, because they are too small relative to the size of the market. Instead, oil prices are determined by worldwide demand; specifically, whether that demand is high enough to justify the cost of producing "marginal oil” (the oil that is the most expensive to produce).
  5. Obamacare could re-energize the small business sector. The Affordable Health Care Act could spur entrepreneurial activity, because if more prospective entrepreneurs can get insurance on their own (without having to work for a large employer), they will be more likely to take the risk of starting a business.

Review more of this year's biggest business lessons in parts one and two of our "Big Ideas of 2012" series.

 

About The Author

TXE Staff

Staff, Texas Enterprise

The Texas Enterprise staff covers a broad swath of disciplines and interests. Writers, researchers, technicians and artists all contribute to the...

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