Part 1: Imperfect Competition in Oil Markets
The market variations between the present and the last 40 years shows profound differences. The differences prompting the near end of OPEC+ cartel include the rise of Russia as major contributor in the determination of oil prices. Also, due to the worth of the commodity triggered worldwide exploration efforts leading to several countries becoming producers themselves in the recent past (Bordoff, 2020). Further, to counter the oil shale shocks, Saudi Arabia would be required to suffer the brunt as most of the OPEC+ member countries are just by name and characterized by inefficiency to be effective partners such as “sanctions-hit Iran, violence-prone Libya and Nigeria and collapsing Venezuela” (Jakab, 2020). This behavior is likely to persist and the future of oil demand continues to dwindle as other countries become producers. As a result, demand from traditionally major producers will stagnate and prompt a subsequent drop in price of the resource.
Part 2: Other Market Failures for Non-renewable resources
By becoming a self-sufficient energy producer, the US stands at a strategic position to control market prices and mitigate the local demand and supply. The US by being self-sufficient is critical to ascertain that price variations from other countries does not affect its normal operations. However, these approaches may be difficult to implement prompting the need for not becoming self-sufficient in energy production. High costs and lower prices risks setting the US producers in debt crisis that can have adverse effects on the country’s economy.
Part 3: Renewable Energy Sources
In Kenya, the Scaling-Up Renewable Energy Program is a government policy adopted by the Ministry of Energy in 2008 with a lifeline of 2030 to achieve its objectives. The policy seeks to introduce zero-rated (0%) import duty on renewable energy equipment and accessories to support the transition. In line with Vision 2030 policies, the renewable energy programs aim to double electricity production for the country through sources such as wind, bioenergy, hydropower, and solar energy (EPRA, 2020). The approach seeks to replace reliance on oil and coal as the primary energy producing resources.
Part 4: Electricity
Total bill = $174.9
Real increase in the electric bill = (174.9-105.65)/174.9 * 100
= 39.594 %
Gainesvile households are bound to pay additional costs to sustain the energy supply. The typical residents are at risks of being unable to sustain the policy. In overall, the policy is bound to hurt an extensive number of people as costs increase profoundly. This undermines economic activities in the area and its environs.
Bordoff, J. (2020, March 9). Why this oil crash is different. Retrieved from https://foreignpolicy.com/2020/03/09/opec-russia-shale-oil-price-collapse/
Energy and Petroleum Regulatory Authority, EPRA. (2020). Relevant information for operating a power plant based on renewable energy. Retrieved from https://renewableenergy.go.ke/
Jakab, S. (2020, March 8). OPEC, R.I.P. Wall Street Journal. Retrieved from https://www.wsj.com/articles/opec-r-i-p-11583722267