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An Integrated Model of Oil Production

This paper demonstrates that models which combine the physical reserves of oil with economic and regulatory variables provide better forecasts of future production than models based on either reserves or economic variables alone. Four alternative models are specified and estimated. Out-of-sample forecasts show that a model combining reserves, lagged production, and the real price of oil performs much better than models based on reserves alone or economic variables alone.

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Energy Specializations: Petroleum – Exploration and Production; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes: C53: Forecasting Models; Simulation Methods, Q38: Nonrenewable Resources and Conservation: Government Policy, Q31: Nonrenewable Resources and Conservation: Demand and Supply; Prices, C58: Financial Econometrics, Q41: Energy: Demand and Supply; Prices, D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity, Q40: Energy: General, Q21: Renewable Resources and Conservation: Demand and Supply; Prices, D21: Firm Behavior: Theory

Keywords: Integrated model, oil production, forecasting, Hubbert's model, oil reserves, US.

DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No1-6

Published in Volume20, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.