August 6, 2007
Another Energy Futures Market?
Arnold Kling
If you want some action in the next few years, you can operate in existing markets. If you want to buy the right to sell your alternative fuel for the equivalent of $70 at any time in the next couple of decades, you are out of luck.The Nunes solution is to have the government create a market for long-run put options for alternative fuels. This would give those who have constructed qualifying facilities the right to sell (or ``put'') their product at a minimum price to the government should the actual price drop below that.
Thanks to a commenter for the pointer.
I don't think that you need an alternative energy market. Oil prices and the price of alternative energy will be highly correlated enough. All you need to do is extend the oil market to include a contract dated, say, January 3, 2015 another one dated January 3, 2020, and another one dated January 3, 2025. Then abolish the Department of Energy and have the government spend some of that money going "long" on those contracts.
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