Search

Begin New Search
Proceed to Checkout

Search Results for All:
(Showing results 1 to 2 of 2)



OPEC Production: The Missing Link

James M. Griffin and Lawrence M. Vielhaber

Year: 1994
Volume: Volume 15
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol15-NoSI-7
View Abstract

Abstract:
The future of oil depends critically on the production decisions of OPEC, which in turn depend on a variety of factors internal and external to the cartel. This paper uses a simulation of the world oil market to compute the, payoff to OPEC members of alternative price and production profiles, focusing on the incentives to cooperate as well as to cheat. A "tit-for-tat" strategy by the, Saudis significantly reduces the incentives to cheat, but the payoff for cheating is still positive for the smaller OPEC producers. Accordingly, prices well below the cartel's joint profit maximizing level seem most likely.



How to Value Proved but Undeveloped Petroleum Reserves

Lawrence M. Vielhaber

Year: 2024
Volume: Volume 45
Number: Number 2
DOI: 10.5547/01956574.45.2.lvie
View Abstract

Abstract:
Proved undeveloped reserves (PUDs) are typically assigned a value of zero when the cost to produce them is greater than the prevailing forward curve. The zero valuation occurs despite the option value contained in even the most expensive PUDs. While PUDs are worthless if spot and forward prices forever remain below the cost to produce them, they have positive value if either the spot price or a contracted futures price exceeds the cost at any time. Since the probability that future prices exceed cost is positive, PUDs have positive option value despite the industry practice.Zero valuation occurs primarily because financing is unavailable when hedging is contingent on uncertain future outcomes where probabilities cannot be modeled. The failure of models to recognize contingent hedging is a limitation that leads to chronically undervalued PUDs in marginal and sub-marginal price environments. The literature is silent on contingent hedging where financing is dependent on forward curves that will not exist until some future date. This paper introduces a model that addresses these limitations.





Begin New Search
Proceed to Checkout

 

© 2024 International Association for Energy Economics | Privacy Policy | Return Policy