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Energy capital

 

            Today, the world is being confronted with ever-increasing reliance on conventional energy. The New York Times article, "Report Sees Vast Needs for Energy Capital," discusses the predicted future demand for energy. The 2003 World Energy Investment Outlook report, which explores the need for enormous energy capital by the year 2030, demonstrates the laws of supply and demand. .
             The laws of supply and demand demonstrate how the free market economy works. The law of supply demonstrates that in a free market economy, an increase in prices will increase the quantity demanded; the law of demand demonstrates that in a free market economy, an increase in prices will decrease the quantity demanded. The price, at which the quantity supplied and the quantity demanded is equal, is the market price of the good or service. Supply is determined by the cost of production and the prices of related products being produced. Demand is determined by the income and wealth the consumers, prices and the availability of substitutes and complementary goods, tastes and preferences of the consumer, future expectations with regard to prices and the economy. .
             The World Energy Investment Outlook report predicts that because of increasing reliance on conventional energy, it will take more than $16.5 trillion of investments in order to ensure that the world has sufficient energy to meet the demand until 2030. The increasing demand for energy, the lack of reliable and efficient substitutes for conventional energy, and the enormous amount of investment needed to meet the demand can drive the energy prices up. The trillions that will be invested in existing energy technology arise the question of whether to focus on innovative technologies.
             Moreover, the report finds Persian Gulf region will play an important role in determining the world's economy through its supply of the oil. Because oil from the Middle East is relatively cheap, it is estimated that 43 percent of the world's oil will come from the Persian Region by 2030.


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