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Natural Gas in the U.S.: How Far Can Technology Stretch the Resource Base?

Abstract:
We review the theoretical underpinnings of the exponential model, the amount of gas discovered per unit effort, a quantity called yield-per-effort (YPE), and estimate an econometric model that represents the historical determinants of the YPE for nonassociated gas discoveries in the lower 48 states from 1943 to 1991, the entire period for which the requisite data are available. Results indicate the YPE declines as the exponential function of cumulative drilling when short run changes in drilling effort, real gas prices, and shifts between onshore and offshore are accounted for. We explicitly test and reject the hypothesis that technological change has arrested or reversed the long run decline in YPE. We also discuss some alternative models of YPE that misrepresent the interplay of depletion and technical innovation, as well as the process of innovation itself, and the statistical and methodological shortcomings of the empirical analyses used to support several alternative models of YPE.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Energy Modeling – Sectoral Energy Demand & Technology; Natural Gas – Exploration and Production

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
Q55 - Environmental Economics: Technological Innovation
D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

Keywords: Natural gas supply, gas discoveries, technology change, US, statitistical ananalysis, yeild-per-effort (YPE)

DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No2-5


Published in Volume18, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.