Stainability and Scarcity in Economics
The Economics topics such as sustainability and scarcity are explained with a structured and
analytical approach, helping students develop a deep understanding of economic principles.
Below is a clear explanation of these concepts:
1. Scarcity in Economics
Definition:
Scarcity refers to the fundamental economic problem where limited resources cannot satisfy
unlimited human wants. It forces individuals, businesses, and governments to make choices
about how to allocate resources efficiently.
Key Aspects of Scarcity:
• Limited Resources – Natural resources (oil, water, land), human resources (labor, skills),
and capital (machines, infrastructure) are finite.
• Unlimited Wants – Human desires for goods and services constantly grow, but available
resources remain constrained.
• Opportunity Cost – Choosing one option means giving up another; for example, using
farmland for biofuels instead of food production.
Examples:
• A country with limited freshwater resources must decide between using it for agriculture
or industrial production.
• A business with limited investment funds must choose between expanding operations or
developing new products.
2. Sustainability in Economics
Definition:
Sustainability in economics means using resources in a way that meets current needs without
compromising the ability of future generations to meet theirs. It balances economic growth,
environmental protection, and social well-being.
Pillars of Sustainability:
1. Economic Sustainability – Ensuring long-term economic growth without depleting
resources. Example: Investing in renewable energy to reduce reliance on fossil fuels.
2. Environmental Sustainability – Protecting natural resources and ecosystems. Example:
Using sustainable farming methods to prevent soil erosion.
3. Social Sustainability – Promoting fairness, equity, and quality of life for all people.
Example: Fair wages and ethical business practices.
Examples of Sustainable Practices:
• Companies adopting eco-friendly production techniques to reduce pollution.
• Governments enforcing regulations on deforestation and carbon emissions.
• Consumers preferring reusable materials to minimize waste.
Link Between Scarcity and Sustainability
• Scarcity forces societies to prioritize resource allocation, which can lead to sustainable
or unsustainable practices.
• If resources are overused without considering sustainability, they may become depleted,
leading to economic crises and environmental damage.
• Sustainable policies aim to manage scarce resources wisely, ensuring long-term
economic stability and environmental preservation.
Conclusion
We learnt how scarcity influences decision-making and why sustainability is essential for long-
term economic development. By understanding these concepts, we can analyze real-world
economic issues and propose responsible solutions.
Introduction: The Energy Sector in the USA
Historical Background & Evolution (Last 20 Years)
The U.S. energy sector has undergone a major transformation over the past two decades.
Traditionally dominated by fossil fuels (oil, gas, and coal), the industry has seen a significant
shift towards renewable energy sources such as solar, wind, and hydroelectric power.
• Early 2000s: The U.S. relied heavily on oil and natural gas, with coal still playing a major
role in electricity generation.
• 2010s: Advances in fracking (hydraulic fracturing) led to a boom in natural gas
production, making the U.S. one of the largest energy producers. At the same time,
government policies encouraged investment in solar and wind energy.
• 2020s & Present: The U.S. is now leading in renewable energy adoption, with a strong
push for carbon neutrality and sustainability under global climate agreements.
Key Issues in the Energy Sector
1. Sustainability Challenges
o Fossil fuel depletion: Oil and gas reserves are finite, creating long-term energy
security concerns.
o Environmental impact: Burning fossil fuels releases carbon emissions,
contributing to climate change.
o Renewable energy expansion: Scaling up solar, wind, and hydro requires
investment, infrastructure, and technology.
2. Scarcity of Resources
o Oil & Gas: Global oil prices fluctuate due to geopolitical conflicts and supply
chain disruptions.
o Rare Earth Minerals: Solar panels, wind turbines, and batteries require lithium,
cobalt, and nickel, which are limited and expensive.
Major Transformational Changes in the Industry
1. The Rise of Renewable Energy
o The U.S. has significantly reduced dependence on fossil fuels, with wind and
solar now accounting for over 20% of electricity production.
o States like California and Texas lead in solar and wind energy adoption.
2. Shale Revolution & Natural Gas Boom
o The fracking revolution in the 2010s made the U.S. the largest oil producer,
reducing reliance on foreign oil.
o Liquefied Natural Gas (LNG) exports have increased, making the U.S. a key player
in global energy markets.
3. Government Policies & Green Energy Investments
o The Biden Administration's Inflation Reduction Act (2022) offers tax credits &
incentives for clean energy projects.
o Companies like Tesla, NextEra Energy, and ExxonMobil are investing heavily in
renewables.
Major Companies in the Energy Sector (USA)
Company Industry Focus Key Contributions
ExxonMobil Oil & Gas Leading petroleum producer
Chevron Oil & Gas Invests in carbon capture
NextEra
Renewable Energy (Solar & Wind) Largest U.S. renewable energy company
Energy
Renewable Energy (Battery Innovates in solar power & electric
Tesla
Storage) vehicles
BP America Oil & Gas + Renewable Energy Transitioning into green energy
Conclusion
The U.S. energy sector is evolving rapidly, balancing between traditional oil & gas production
and the transition to renewable energy. While sustainability challenges and resource scarcity
remain key concerns, technological advancements and policy changes are driving the shift
towards a cleaner energy future.
Over the past 20 years, the oil and gas industry in America has undergone significant changes
due to advancements in technology, shifts in government policies, and evolving market
dynamics. Here are some of the most notable transformations:
1. The Shale Revolution (2000s – Present)
• Hydraulic fracturing (fracking) and horizontal drilling revolutionized oil and gas
extraction, unlocking vast reserves in shale formations like the Permian Basin, Bakken,
and Marcellus Shale.
• The U.S. transitioned from an oil importer to a major producer, surpassing Saudi Arabia
and Russia in crude oil production by 2018.
• Natural gas production surged, making the U.S. the world's largest natural gas producer.
2. Rise of LNG (Liquefied Natural Gas) Exports
• The U.S. became a leading exporter of LNG, with Cheniere Energy’s Sabine Pass
terminal opening in 2016.
• Key export destinations include Europe, Asia, and Latin America.
• LNG exports have strengthened U.S. energy influence globally, especially after the
Russia-Ukraine war, which increased Europe's reliance on U.S. gas.
3. Oil Price Volatility & Market Crashes
• 2008–2009 Financial Crisis: Oil prices peaked at $147 per barrel (2008) but crashed to
$30 (2009).
• 2014–2016 Oil Glut: OPEC’s refusal to cut production led to oversupply, causing prices to
fall from $100 to $30 per barrel.
• 2020 COVID-19 Crisis: Global lockdowns caused oil demand to collapse, with WTI crude
briefly hitting negative prices (-$37 per barrel) in April 2020.
4. Shift Towards Renewable Energy & Decarbonization
• Government policies and corporate strategies have increasingly focused on reducing
carbon emissions.
• Major oil companies (ExxonMobil, Chevron) invest in carbon capture, hydrogen, and
renewables.
• Biden Administration’s Green Energy Push (2021–Present) aims for net-zero emissions
and clean energy expansion.
• Some states, like California and New York, have aggressive renewable energy targets.
5. Political & Regulatory Changes
• Keystone XL Pipeline Cancellation (2021) due to environmental concerns.
• Lifting and reimposing of sanctions on Iran & Venezuela affecting global oil supply.
• Drilling restrictions on federal lands vs. encouragement of domestic energy
independence.
6. U.S. Strategic Petroleum Reserve (SPR) Releases
• The U.S. tapped into the SPR multiple times, most notably in 2022, to control rising fuel
prices following Russia’s invasion of Ukraine.
• The move temporarily lowered gas prices but raised concerns about long-term energy
security.
7. The Electric Vehicle (EV) Boom & Demand Shifts
• The rise of Tesla and other EV manufacturers has reduced gasoline demand growth.
• Automakers plan to phase out gas-powered vehicles by 2035–2050, which may reshape
future oil consumption.
Conclusion
The last two decades have seen the U.S. oil and gas industry evolve from energy dependency to
dominance, driven by technology, geopolitics, and environmental concerns. Moving forward,
the industry faces challenges from climate policies, renewable energy competition, and global
instability, but it remains a critical part of the U.S. economy.
Pictorial Description to Support Your Findings:
1. Historical Evolution of U.S. Energy (Last 20 Years)
Image Idea: A timeline infographic showing the shift from fossil fuels to renewable energy in
the U.S.
2. Key Issues in the Energy Sector
Image Idea:
• A bar chart comparing fossil fuel vs. renewable energy consumption in the U.S.
• An image of an oil refinery and a solar farm, highlighting the contrast between
traditional and modern energy sources.
3. Transformation of the Industry
Image Idea:
• U.S. shale oil drilling sites (representing the fracking boom).
• A wind farm in Texas or California showcasing renewable energy growth.
4. Companies Leading the Energy Sector
Image Idea:
• Logos of major companies like ExxonMobil, NextEra Energy, Tesla, and Chevron.
• A pie chart showing market share distribution among these companies.
5. Government Policies & Green Investments
Image Idea:
• A visual of Joe Biden signing the Inflation Reduction Act (2022), which supports
renewable energy.
• An infographic of U.S. government incentives for clean energy adoption.
2- Demand
1. Who is Demanding the Products and Services?
Oil & Gas Sector in US
• Major Consumers: Transportation (gasoline, diesel, jet fuel), industrial sectors, and
residential heating.
• Key Players: Refineries, power plants, and chemical industries.
• Geographic Demand: Strong demand in Texas, California, and the Gulf Coast due to
industrial hubs.
Renewable Energy Sector
• Major Consumers: Utility companies, residential users (solar panels), and corporations
aiming for sustainability goals.
• Key Players: Solar, wind, and hydroelectric companies (e.g., NextEra Energy, Tesla, and
Ørsted).
• Geographic Demand: High demand in California, Texas, and New York due to
government incentives.
2. Pricing Trends (Last 3-5 Years)
Oil & Gas
• Prices have fluctuated due to COVID-19, geopolitical conflicts (Russia-Ukraine War),
and OPEC+ policies.
• In 2020, crude oil prices crashed due to low demand but surged in 2022 following global
supply chain disruptions.
• As of 2024, U.S. gas prices remain volatile due to regulatory shifts and global oil market
dynamics.
Renewable Energy
• Solar panel and wind energy costs have decreased by nearly 70% over the last decade
due to technological advancements.
• Government subsidies and tax credits (like the Inflation Reduction Act 2022) have
made renewables more affordable.
• The cost of battery storage has also declined, improving energy efficiency.
3. Factors Affecting Demand
Oil & Gas
Positive Demand Factors:
✔ Industrial expansion (Petrochemicals, Transportation).
✔ Global conflicts affecting supply, increasing demand for U.S. exports.
Negative Demand Factors:
Growth of electric vehicles (EVs) reducing gasoline consumption.
Strict environmental policies limiting fossil fuel use.
Renewable Energy
Positive Demand Factors:
✔ Government incentives promoting green energy.
✔ Corporate ESG (Environmental, Social, and Governance) policies.
✔ Technological advancements making renewable energy more efficient.
Negative Demand Factors:
Intermittency issues (wind and solar depend on weather conditions).
High initial costs for grid infrastructure upgrades.
4. Demand Curve Representation
• Oil & Gas: Downward-sloping demand curve, but short-term fluctuations due to price
shocks.
• Renewable Energy: Steady upward trend as costs fall and adoption increases.
Here are two demand curves representing the changes in demand:
1. Oil & Gas Demand Curve (Left Graph - Red Line):
o Shows the inverse relationship between price per barrel and quantity demanded.
o As the price decreases, demand for oil and gas increases.
2. Renewable Energy Demand Curve (Right Graph - Green Line):
o Displays the relationship between cost per MWh and demand for renewable
energy.
o As the cost decreases, the demand for renewable energy sources rises.
These graphs visually support the shift in demand patterns based on price fluctuations.
• Oil & Gas Supply Curve (Red): Initially, supply was higher, but due to stricter regulations
and higher production costs, the curve shifts left, indicating a decrease in supply.
• Renewable Energy Supply Curve (Green): With government incentives and
technological advancements, supply has increased, shifting the curve to the right.
This visual representation aligns with real-world economic trends.
4- Market Equilibrium
Step 1: Identify Market Equilibrium Trends
• Determine if prices in your chosen market have remained stable or fluctuated in the past
3-5 years.
• Research factors that influence these changes, such as demand shifts, production costs,
government policies, or global events.
Step 2: Analyze Surpluses & Shortages
• Surplus: When supply exceeds demand, leading to excess products and possible price
reductions.
• Shortage: When demand exceeds supply, leading to scarcity and possible price
increases.
• Gather statistics, charts, or images to support your findings.
Step 3: Illustrate Market Equilibrium with a Graph
You will create a market equilibrium diagram showing equilibrium price and quantity,
along with surplus and shortage areas.
Monopoly = 1 brand taking over the entire industry with competition almost equal to none.
Oligopoly = An alliance of two or more than two brands (but not too many) which enjoy the
dominance together in their industry and giving minimal chances for other brands to pierce the
market.
Perfect Competition among brands: This is always beneficial for the end user, why because the
price factor remains in competition all the time and no brand can afford to make an
overwhelming increase in the price.
• The Demand Curve (D) (downward-sloping)
• The Supply Curve (S) (upward-sloping)
• The Equilibrium Point where demand meets supply
• The Equilibrium Price and Quantity, marked with dashed lines
Now, you just need to:
Add real-world examples with statistics from your research
Cite sources in-text and in the bibliography
5- Predictions & Conclusion
Predictions and Conclusions
The future of the Renewable Energy and Oil & Gas industry in the USA is poised for significant
transformation. While traditional fossil fuels continue to play a crucial role in the country's
energy mix, the shift toward clean energy is accelerating due to regulatory policies,
technological advancements, and environmental concerns.
Short-Term Changes (Next 5 Years)
1. Increased Investments in Renewable Energy – The U.S. government has introduced
incentives under the Inflation Reduction Act (IRA) of 2022, leading to a surge in solar
and wind energy projects. According to the EIA (Energy Information Administration),
renewable energy is projected to supply 24% of U.S. electricity by 2025, up from 20% in
2022.
2. Oil & Gas Market Volatility – Due to geopolitical tensions (such as the Russia-Ukraine
conflict) and supply chain disruptions, crude oil prices may remain unstable. The EIA
forecasts oil production to stay around 12.8 million barrels per day in 2025, with
demand fluctuating based on economic growth.
3. Rise of Carbon Capture Technologies – Many oil and gas companies, including
ExxonMobil and Chevron, are investing heavily in carbon capture and storage (CCS) to
align with net-zero goals while maintaining fossil fuel production.
Long-Term Changes (Beyond 2030)
1. Renewables to Overtake Fossil Fuels – By 2050, solar and wind could generate over
50% of U.S. electricity, according to the International Energy Agency (IEA). The falling
cost of solar panels and battery storage will make renewables more cost-effective than
oil and natural gas.
2. Declining Demand for Oil in Transportation – With EV adoption rising, oil consumption
for vehicles will decrease. The Biden administration’s push for 50% of new car sales to
be electric by 2030 will accelerate this trend.
3. Hydrogen and Nuclear Growth – Green hydrogen and advanced nuclear reactors (such
as small modular reactors - SMRs) will become essential in balancing energy supply,
especially for industrial sectors.
What is Likely to Stay the Same?
1. Oil & Gas Will Still Play a Role – Despite renewable energy growth, natural gas will
remain a dominant fuel for power generation and heating due to its reliability and
infrastructure. The EIA predicts natural gas will account for 30-35% of U.S. electricity
generation through 2040.
2. Government Policy Influence – Changes in administrations will continue to affect energy
policies, with potential shifts in tax incentives, carbon pricing, and drilling regulations
influencing both renewables and fossil fuel industries.
3. Energy Storage Demand Will Rise – As renewables expand, the need for large-scale
battery storage will remain a priority to address grid stability and intermittent power
generation.
Final Thoughts
The U.S. energy sector is undergoing a historic transition, balancing the need for energy
security, economic stability, and environmental sustainability. While renewables are growing
rapidly, oil and gas will remain relevant in specific applications. Investment, innovation, and
policy decisions will ultimately determine how fast this transformation occurs.
