producing and selling the oil, as against selling it at some future time. In the case of oil “such storage” can be achieved with unlimited capacity and at zero physical cost by simply leaving it in the ground. Future prices of energy can be lower than the spot to future price relationship indicated by applying the social rate of interest to spot prices. Nevertheless, the dominant factor is the social rate of interest in imposing a ceiling on future vs current prices. This is the case even for a monopoly. The key is that the commodity is sold in an open competitive unregulated market. Prices can be turned downwards through price regulation and a multitude of other forms of intervention and distortions of the market distribution system. Or many developments can occur between now and the future to add to the available commodity base to make future prices lower than the maximum path of spot to future prices indicated in Fig. 3. The key, however, is that an upper limit exists to fossil fuel prices projected into the future under a rather wide variety of economic considerations. The precise path of spot to future prices, as well as the assessment of how correctly spot prices indeed do reflect market conditions rather than distortions imposed by regulations or energy monopolies, is a different matter. However, deviations from the market price indicated in Fig. 3, which reflects the social rate of interest in trading off future and present consumption, can result from price patterns that are trading off lower current fuel prices for substantial increases in future fossil fuel prices for a given limited resource such as fossil fuels. Long-term inexhaustible energy options promise, irrespective of their immediate current economic viability, to put an upper ceiling on potential future fossil fuel prices — be this 30, 40, or 50 years from now. This is illustrated in Fig. 4. Even if implied SPS costs, as best we can tell today, were twice those of current fossil fuel systems, this twofold ceiling is important to the energy options and market 30 to 40 years from now, because it implies a lid on potential future fossil fuel energy prices. In this sense SPS is an insurance now being bought Fig. 4. Spot vs future price relationships: An SPS “ceiling" imposed on OPEC or other fossil fuel price paths.
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