ENE478 The Economics of Petroleum and the Energy Transition (E)

• Topics

  This course examines the economics of petroleum, energy markets, and the ongoing energy transition from fossil fuels to renewable energy. It provides students with a structured economic framework for understanding how energy market functions, how petroleum resources are managed, and how climate policy and technological change shape the future of the energy sector, with particular emphasis on the Norwegian experience.

  The course is organized as a flipped classroom. Core concepts are introduced through pre-recorded learning videos and assigned readings before class, while lecture time is devoted to applications, case discussions, and analytical exercises. This structure allows students to actively apply economic reasoning to real-world energy and policy challenges.

  The main topics covered in the course include:

  • Introduction to petroleum and energy markets: The history and development of petroleum markets, the current structure of global energy markets, the role of energy in the world economy, and the economic forces driving the renewable energy transition.
  • Economic analysis of petroleum production and markets: How firms make production decisions over time, the functioning of oil and natural gas markets, price formation, and long-run resource management.
  • Energy, emissions, and global warming: Environmental regulation, carbon pricing, policies for decarbonizing the transportation sector and other parts of the economy, climate risk, and stranded assets.
  • Petroleum management and resource taxation: Petroleum governance in Norway and other petroleum-rich countries, management objectives, institutional design, resource rent taxation, and the Norwegian petroleum tax system. Macroeconomic implications of the green transition for petroleum-dependent countries.
  • Management of petroleum wealth: Sovereign wealth funds, long-term fiscal policy, the resource curse, Dutch disease, and the economic challenges associated with managing large natural resource revenues.

  This course is designed for students interested in the economic, environmental, and policy dimensions of the energy sector. It develops analytical skills that are relevant for careers in energy and related industries, public policy, consulting, finance, and research, and provides a foundation for evaluating complex developments in today’s rapidly changing energy landscape.

• Learning outcome

  Upon completion of the course, the student can…

  Knowledge

  • demonstrate advanced knowledge of global oil and gas markets and how energy markets are affected by environmental and climate policies.
  • explain how geopolitical factors influence energy markets and assess their implications for global energy markets and sustainability.
  • describe and critically assess the main principles of petroleum management in Norway, including the petroleum taxation system and petroleum wealth management.
  • evaluate the explanatory and predictive power of key economic theories introduced in the course.

  Skills

  • formulate and analyze economic models of resource depletion, production decisions, and market competition in energy markets.
  • apply economic reasoning to assess the impact of policy changes, regulation, and taxation on energy projects and markets.
  • interpret market data and use quantitative information to analyze trends and developments in global energy markets.
  • analyze the economic driving forces behind the global energy transition and assess their implications for fossil and renewable energy sources.
  • identify and evaluate key risks and opportunities related to environmental sustainability within the energy sector.

  General competence

  • communicate complex economic and energy-related concepts issues clearly and effectively to both specialist and non-specialist audiences, including industry professionals and policymakers.
  • apply insights from Norway's approach to petroleum management and the energy transition in a broader international context.
  • critically evaluate data sources, forecasts, and analytical arguments related to energy markets, climate policy, and petroleum management.

• Teaching

  The course is organized as a flipped classroom. Pre-recorded learning videos are made available online, and students are expected to review the relevant material before class. In-class time is primarily devoted to analytical exercises, problem solving, and case discussions, and encourages active student participation. Teaching is conducted mainly through on-campus sessions, supplemented by some Zoom meetings.

• Recommended prerequisites

  A basic understanding of calculus and intermediate concepts in microeconomics and macroeconomics is beneficial.

• Credit reduction due to overlap

  ENE478 cannot be taken in combination with the following courses due to overlap:

  • ENE467 Energy and Climate Policy
  • ECN420 The Economics of Petroleum and the Energy Transition

• Compulsory Activity

  Students must complete and receive approval for one compulsory assignment during the semester to take the final exam.

  The assignment requires students to work in groups of three to apply economic models and analytical frameworks from the course to a relevant issue within petroleum, energy markets, or the energy transition. The purpose of the assignment is to promote deeper learning and strengthen students’ analytical and written communication skills.

  The assignment is assessed as approved / not approved. Students who do not receive approval will be given an opportunity to revise and resubmit within a specified deadline.

  Students who were enrolled in the course and eligible to take the final exam before the compulsory assignment requirement was introduced in autumn 2026 may retake the exam without fulfilling the assignment requirement. Standard rules for retake apply.

• Assessment

  There are two forms of assessment in the course, weighted equally: an in-class assessment completed during the semester and a final exam at the end of the semester.

   

  (1) In-class assessment: analytical tests and quizzes (50%)

  The in-class assessment consists of (a) analytical tests and (b) quizzes. The in-class assessment counts toward the final course grade together with the final exam.

  a) In-class analytical tests

  Students will be given three individual in-class analytical tests during the semester. The dates will be announced at the beginning of the semester. Each test will be administered during ordinary lecture hours and will assess students’ understanding of core economic models, analytical frameworks, and their ability to apply these to structured and calculation-based problems. The tests are individual and closed-book. Each student’s two best test results* will count toward the in-class assessment grade, contributing 60% of the in-class assessment grade.

  b) In-class quizzes

  Students will be given a short individual quiz in every lecture. Each student’s seven best results* over the semester will count toward the in-class assessment grade, contributing 40% of the in-class assessment grade.

  * To limit the penalty for occasional absence while preserving incentives for participation, assessments that are not taken will receive a score of 30%. Assessments that are taken will also receive a minimum score of 30%. The 30% level reflects the lower range of observed performance among students who attempt an assessment with limited preparation. This policy is designed to avoid penalizing students for attempting an assessment and to reduce the impact of occasional absence, while maintaining clear incentives for regular participation and adequate preparation.

   

  (2) Final exam (50%)

  A 3-hour individual digital school exam at the end of the semester.

  Both the in-class assessment and the final exam must be written in English.

• Grading Scale

  A-F

• Computer tools

  Some use of data analysis software such as Excel, Python, R or Stata.

• Literature

  Selected book chapters and articles from academic journals (some mandatory, most recommended), including but not limited to:

  • Massimo F., & S. Srinivasan. 2024. An Introduction to Energy Economics and Policy. Cambridge: Cambridge University Press. [Selected chapters]
  • Hannesson, R. (1998). Petroleum economics: issues and strategies of oil and natural gas production. Westport, Conn.: Quorum. [Selected chapters]
  • Allcott, H., & Knittel, C. (2019). Are consumers poorly informed about fuel economy? Evidence from two experiments. American Economic Journal: Economic Policy, 11(1), 1-37.
  • Atanasova, C., & Schwartz, E. S. 2019. Stranded fossil fuel reserves and firm value (No. w26497). National Bureau of Economic Research.
  • Anderson, M.L. and Aufhammer, M. 2014. Pounds that kill: The external costs of vehicle weight. Review of Economic Studies 81(2): 535-571.
  • Anderson, S.T., R. Kellogg & S.W. Salant. 2018. Hotelling under pressure. Journal of Political Economy 126(3): 984-1026.
  • Covert, T, M. Greenstone & C.R. Knittel. 2016. Will we ever stop using fossil fuels? Journal of Economic Perspectives 30(1): 117-138.
  • Baumeister, C. & L. Kilian. 2016. Forty years of oil price fluctuations: Why the price of oil may still surprise us. Journal of Economic Perspectives 30(1): 139-160.
  • Bento, A.M., M.R. Jacobsen, C.R. Knittel, and A.A. Van Benthem. 2020. Estimating the Costs and Benefits of Fuel-Economy Standards. Environmental and Energy Policy and the Economy, 1, 129-157.
  • Bornstein, G., P. Krusell, S. Rebelo. 2023. A World Equilibrium Model of the Oil Market. The Review of Economic Studies 90(1): 132-164.
  • Boadway, R., & Keen, M. 2015. Rent taxes and royalties in designing fiscal regimes for nonrenewable resources. In Handbook on the Economics of Natural Resources. Halvorsen, R. and Layton, D.F. (eds.). Edward Elgar Publishing.
  • Christophers, B. 2022. Fossilised Capital: Price and Profit in the Energy Transition, New Political Economy, 27:1, 146-159.
  • Fabra, N., & M. Reguant. 2024. The energy transition: A balancing act. Resource and Energy Economics 76: 101408.
  • Harstad, B., & K. Holtsmark. 2026. The gas trap: Outcompeting coal vs. renewables. Journal of Political Economy, forthcoming.
  • Heal, G. 2022. Economic aspects of the energy transition. Environmental and Resource Economics, 83, 5-21.
  • Jakob, M., & Hilaire, J. (2015). Climate science: Unburnable fossil-fuel reserves. Nature, 517(7533), 150-152.
  • Knittel, C.R. 2012. Reducing petroleum consumption from transportation. Journal of Economic Perspectives 26(1): 93-118.
  • Lund, D. 2014. State participation and taxation in Norwegian petroleum: Lessons for others? Energy Strategy Reviews 3: 49-54.
  • Sandler, R. 2012. Clunkers or Junkers? Adverse Selection in a Vehicle Retirement Program. American Economic Journal: Economic Policy 4(4): 253-281.
  • van den Bremer, T., F. van der Ploeg, and S. Wills. 2016. The elephant in the ground: Managing oil and sovereign wealth. European Economic Review 82: 113-131.
  • van der Ploeg, F. 2011. Natural resources: curse or blessing? Journal of Economic Literature 49(2): 366-420.
  • van der Ploeg, F., & Rezai, A. 2020. The risk of policy tipping and stranded carbon assets. Journal of Environmental Economics and Management, 100, 102258.

  In addition: Selected reports.

• Permitted Support Material

  Calculator 

  One bilingual dictionary (Category I) 

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support material https://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/ and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/