The flow and asset markets of a nonrenewable resource
A theoretical model of the flow and asset markets for a nonrenewable resource was constructed. The flow market is the market for the extracted resource. The asset market is represented by the market for reserves of the resource. The flow and asset markets are combined as a simultaneous system to represent the behavior of a nonrenewable resource market. A key feature of this approach is the specification of an explicit and endogenous asset market. Conventional models of nonrenewable resource markets are based on the optimal depletion of the resource over time. These optimal depletion models effectively specify an implicit asset market and assume that the resource market adjusts by changes in extraction. In contrast, the flow-asset specification recognizes a simultaneous adjustment process in the asset market and flow market. The flow-asset framework is modeled in the case of certainty and uncertainty. Comparative statics for both models are derived. Several extensions are developed from the flow-asset framework. First, the price dynamics and stability properties are evaluated from an excess demand price adjustment model. Second, exploration is added to the flow-asset model to allow for the discovery of new reserves. Third, empirical estimates are derived in an application of the flow-asset framework to the domestic oil and natural gas markets.
- Research Organization:
- Colorado Univ., Boulder, CO (USA)
- OSTI ID:
- 5192082
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
290200 -- Energy Planning & Policy-- Economics & Sociology
290400* -- Energy Planning & Policy-- Energy Resources
294000 -- Energy Planning & Policy-- Fossil Fuels
ECONOMETRICS
ECONOMICS
MARKETING RESEARCH
MATHEMATICAL MODELS
OPTIMIZATION
RESOURCE DEPLETION
RESOURCES