Energy catastrophes and energy consumption

The possibility of energy catastrophes in the production of energy serves to make estimation of the true social costs of energy production difficult. As a result, there is a distinct possibility that the private marginal cost curve of energy producers lies to the left or right of the true cost curve. If so, social welfare will not be maximized, and underconsumption or overconsumption of fuels will exist. The occurrence of energy catastrophes and observance of the market reaction to these occurrences indicates that overconsumption of energy has been the case in the past. Postulations as to market reactions to further energy catastrophes lead to the presumption that energy consumption levels remain above those that are socially optimal.