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Long-Run Effects of the Canadian National Energy Agreements

S. L. Schwartz, J. D. Fuller, and W. T. Ziemba

Year: 1985
Volume: Volume 6
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No1-7
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Abstract:
For the last decade Canadian energy policy and oil pricing policy have been subjects of heated debate, dividing the country into several interest groups. The debate began when the federal government shielded the Canadian consumer from rapid world oil price increases by freezing domestic wellhead prices and subsidizing oil imports. This created a single price for oil across the entire country (except for transportation cost differences). The subsidy was to be paid by an export tax equivalent to the difference between domestic price and the world price. This policy was seen as an immediate response to a short-term problem: either world prices would return to lower levels or domestic prices could slowly adjust to the higher level without creating a price shock. Once a subsidy is established, however, it is hard to withdraw. Industries and consumers that rely on low-cost oil can be expected to lobby for continued subsidies. By observing real costs, moreover, the Canadian subsidy destroyed incentives to conserve costly fuels (e.g., imported oil). And there was no incentive to increase domestic production of such valuable commodities. By intervening, the federal government appeared to take on the responsibility of maintaining a status quo with respect to regional income distribution. Thus the scene was set.

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Predicting the Discoveries and Finding Costs of Natural Gas: the Example of the Scotian Shelf

M. Power and J. D. Fuller

Year: 1991
Volume: Volume 12
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No3-6
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Abstract:
Predicting the discovery rate and marginal finding costs of natural gas resources requires a well-documented and long statistical history. For partially explored basins, the statistical history is often inadequate. Attempts at avoiding the problem have been made using probabilistic modelling approaches. These are used to estimate the parent population of pools available for discovery and the probable discovery rate. The phenomenon of economic truncation, however, calls into question the precision and utility of such estimates. Furthermore, the exploration process is known to be biased toward larger pools, but no method of determining the extent of the bias has been discussed in the literature to date. To avoid these defciencies, this paper employs the pool size distribution estimates routinely produced by geologists to drive a probabilistic modelling framework taking explicit account of the physical laws of resource depletion. The methodology is discussed and applied to Canada's Scotian Shelf. In order to put the predicted costs for the Scotian Shelf in perspective, the results are then compared to forecasts for Alberta.

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