When energy becomes cheaper, miners can do more mining, leading to an increase in blocks. Given that people are only willing to pay so much for a transaction to complete, there is only so much demand at a certain price point. Once the supply of blocks increases, you eventually have price points where the demand no longer matches the supply. At this point a miner would lower their fee until the demand increases back to supply.
Supply and demand drives prices, but it does so through individual actors setting prices they are willing to pay/accept (or by algorithms that have been setup by some human who set up the rules by which it will set prices).
They're not "lowering their fee". That's not how it works. They might stop mining altogether, but it can never cost more to include a transaction than not to include it, unless including it pushes out another transaction that pays a higher fee.
So a miner will never reduce the cost to include a transaction into their block, even when they aren't getting enough to fill up the block?
>They might stop mining altogether
Maybe, but any market can experience short term irrationality. Maybe it takes them a few hours to stop mining in which they lose money. Or maybe stopping operations costs enough money that the miner won't stop even at a small loss, at least for some amount of time.
> So a miner will never reduce the cost to include a transaction into their block, even when they aren't getting enough to fill up the block?
Sure, if you want to twist the wording like that, they "lower the fee" to the point where they can fill the blocks. But they're not really "lowering their fees". They don't even have a concept of the fee level they're "charging". They can either accept the fees that are available or not.
If they are mining at all then they want to accept the best fees that are available. There is literally no rationale for them to be mining non-full blocks when fee-paying transactions are available to put in the blocks. It's not like it costs more to mine a larger block. The cost to mine a block is fixed, so you may as well get as much fees as you can find.
>They can either accept the fees that are available or not.
Couldn't the same be said of a brick and mortar store? They either accept the offers they are given or they don't. That for some item they only accept offers of exactly 9.99 (plus tax), rejecting not only lower offers but higher offers, doesn't change that the interaction can be described in the same fashion.
All the rest also applies to normal supply and demand. When you do a production run of some item, the cost tends to be fixed per item. Doing another run at a different time may cost different, and it is possible for something extreme to happen (factory accident), but in general the cost of production of a single run is the same.
I see nothing about this that would void basic economic reasoning, where things like 'reducing fees' happens in certain conditions.
And economics can easily account for that. Instead of saying the cost needed to product some number of blocks changes over time by 0, you instead say it changes over time by f(t). You then subtract f(t) (or add, depending upon how you treat the sign) from any actual decrease in cost to mine, and then apply the same logic.
Say the cost to mine falls by x (cheaper energy or some others amount), and x < f(t). x - f(t) < 0. The decrease in cost is less than 0, meaning the cost effectively increased since it didn't decrease by the amount needed due to the built in difficulty increase.
Normal economics works this same way due to scarcity, though the default change in cost into the future is far less sure of a thing. Take mining gold. Given that gold is mined from the cheapest to mine spots first, the more gold you mined, the more the cost of mining the same amount of gold. Maybe a new mine filled with easier to mine gold is found, maybe a current mine runs out of gold much sooner than expected, but it works in a similar manner.
Supply and demand drives prices, but it does so through individual actors setting prices they are willing to pay/accept (or by algorithms that have been setup by some human who set up the rules by which it will set prices).