Three laws of energy transitions

The paper formulates and explores a hypothesis on three general energy transition laws: the law of stable long-term energy costs to income ratio; the law of improving energy quality; and the law of growing energy productivity. These laws are essential for shaping long-term projections and checking for their consistency. All three are rooted in amazingly stable in time and universal across countries energy costs to income ratios. Limited energy purchasing power sets up thresholds, which, if exceeded, bring asymmetry to energy demand to price elasticity. The author believes, that the theoretical postulate on the substantial substitution among production factors, which is used in the production functions theory, may be incorrect. In reality, innovations mainly lead to the substitution of a low-quality production factor with the same yet of a better-quality. Improving energy quality with stable costs to income ratio is accompanied by growing energy productivity. Energy costs to income thresholds are indicators allowing for better projections of oil prices. (c) 2007 Elsevier Ltd. All rights reserved.