Some implications of applying the theory of the economics of exhaustible resources to oil and gas pricing

Conference · Wed Jan 01 04:00:00 EST 1986

OSTI ID:7008397

Inyang, E D; Stultz-Karim, S P; Thackeray, F

The theory of the economics of exhaustible resources is reviewed and discussed in terms of its applicability to the complex structure of the international petroleum industry. Particular attention is given to the implications of uncertainty in reserves estimations for corporate, public, and financial institutions which have the responsibilities of oil and gas pricing and depletion policy formulation. A modification of the model of the economics of exhaustible resources under a freely competitive market structure is analyzed to determine the effect of uncertainty in reserves estimations on the optimal net price and on depletion profiles. The uncertainty in the resultant time until economic exhaustion and the discount present value is found to be directly proportional to the uncertainty in the reserves estimations. These results should be carefully considered in the difficult conflicts between short-term profit maximization and long-term social objectives in the formulation of public and private pricing and depletion policies.

• OSTI ID: 7008397
• Report Number(s): CONF-861080-
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700 -- Petroleum-- Economics
Industrial
& Business Aspects
03 NATURAL GAS
030600 -- Natural Gas-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002* -- Energy Planning & Policy-- Petroleum
294003 -- Energy Planning & Policy-- Natural Gas
ECONOMIC ANALYSIS
ECONOMICS
ENERGY POLICY
ENERGY SOURCES
FLUIDS
FORECASTING
FOSSIL FUELS
FUEL GAS
FUELS
GAS FUELS
GASES
GLOBAL ASPECTS
GOVERNMENT POLICIES
INDUSTRY
INSTITUTIONAL FACTORS
MATHEMATICAL MODELS
NATURAL GAS
NATURAL GAS INDUSTRY
PETROLEUM
PETROLEUM INDUSTRY
PRICES
PUBLIC POLICY
RESERVES
RESOURCE DEPLETION
RESOURCES
SOCIO-ECONOMIC FACTORS