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Forecasting Ultimate Oil Recovery and Its Rate of Production: Incorporating Economic Forces into the Models of M. King Hubbert

Cutter J. Cleveland and Robert K. Kaufmann

Year: 1991
Volume: Volume 12
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No2-3
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Abstract:
Dwindling production of oil from domestic fields and rising consumption have increased U.S. dependence on imported oil to an all-time high. Concern about the effect of this dependence on economic and national security has focused attention on the domestic resource base: how much oil awaits discovery and at what rate can it be produced? We analyze the adequacy of domestic resources by updating and modifying in important new ways the models of discovery and production developed by M. King Hubbert. Hubbert's models have been a lightning rod for debate about the future of oil resources because they have been the most accurate on record. When we include real oil prices and the annual rate of drilling effort in Hubbert's model of oil discovery, there is no evidence for claims that the secular decline in discoveries per foot of well drilled has been arrested or reversed in the lower forty-eight states. Our results indicate that there is little oil waiting to be found in unexplored sedimentary formations in the lower forty-eight states using conventional exploration techniques. Furthermore, we show that the declining quality of the resource base has offset the positive stimuli of price increases and changes in government policy towards a free market. Having passed through a period in which production in the lower forty-eight states fell 20 percent while real oil prices tripled there seems little that the U.S. government can do to alter the bottom line for domestic operators so that U.S. production can displace imports to a significant degree. We conclude that the conventional supply side offers little room to manoeuvre around increased dependence on imported oil.



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

Cutler J. Cleveland and Robert K. Kaufmann

Year: 1997
Volume: Volume18
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No2-5
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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.



On Hyperbolic Discounting in Energy Models: An Application to Natural Gas Allocation in Canada

John Rowse

Year: 2008
Volume: Volume 29
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI-8
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Abstract:
Recent work on time discounting involves hyperbolic discounting, in which the marginal discount rate shrinks over time. This work examines hyperbolic discounting and energy resource allocation utilizing a complex dynamic optimization model of natural gas allocation for British Columbia, Canada. Four hyperbolic and three conventional (constant annual) discount rate paths are considered. Focus is placed on the consequences: of using one hyperbolic discount rate path when another hyperbolic path is appropriate, of using conventional discounting when hyperbolic discounting is appropriate, and of using hyperbolic discounting when conventional discounting is appropriate. The generality and implications of the findings are also considered.



Capital-Energy Relationships: An Analysis when Disaggregating by Industry and Different Types of Capital

Miguel A. Tovar and Emma M. Iglesias

Year: 2013
Volume: Volume 34
Number: Number 4
DOI: 10.5547/01956574.34.4.7
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Abstract:
In this paper we analyze the relationship between capital and energy through cross price elasticities. First, we extend Thomsen's (2000) methodology in order to link the short and long run in a panel data setting, by including an equation for the motion of capital. Then, by using an expansive industry-level data set and two functional forms, we show clear evidence of long run complementarity in all the analyzed industries, and with respect to the different types of capital that we consider (buildings and machinery). We identify the industries with the greatest degree of dependence between energy and capital. These are therefore, the industries in which a policy of increasing energy prices via taxes to reduce energy consumption may have a serious effect, reducing their investment levels. Hence we recommend that a better governmental policy would be to encourage technological diffusion.





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