Oil Supply/Price Shocks
Role of Price Elasticities
Backstop Energy Source
â€¢ Energy source that at a sufficiently high price becomes
competitive with an existing source
â€¢ As gasoline price rise, biofuels become competitive
â€¢ As natural gas price rise, solar becomes competitive
â€¢ Fuel switching over time
â€¢ Shifts price of current fuel downward
â€¢ Provides an upper bound on price (for all substitutable uses)
â€¢ Hotelling rents still need to exist so whole time path shifts downward
â€¢ Lower price encourages more consumption
â€¢ Perverse incentives can exist to keep backstop technologies off market
Two Possible Backstop Paths
Motor Vehicle Fuel from Oil, Biofuels, and Coal
Relationship to Sustainability
â€¢ Sustainability is often loosely and ill-defined
â€¢ By some definitions, almost nothing we do is
â€¢ More operational definitions are usually built on
formal ideas put forward by two economists: John
Hartwick and Robert Solow
â€¢ Basic notion is that sustainability ensures that
future generations are provided the resources to
ensure they can have as high a level of utility as
the current generation has
â€¢ Most common popular definition:
â€¢ Sustainable development is development that meets the
needs of the present without compromising the ability
of future generations to meet their own needs.
â€¢ Put forth by the Brundtland chaired World Commission
on Environment and Development (1987) report
entitled Our Common Future
â€¢ Few policymakers and almost none of the public
recognize what it takes to fulfill the Hartwick-Solow
condition of non-declining utility
â€¢ Technological progress faster then population growth
â€¢ Resource saving technological progress
â€¢ Invest the Hotelling resource rents into replicable capital
â€¢ Human capital or renewable resources
Review of Hotelling Model
â€¢ Owner of exhaustible resource (e.g., oil well, coal
mine) determines how much to extract each period
â€¢ Maximizes net present value with stock constrait
â€¢ Key principle is that discounted resource rent is the
same in all time periods
â€¢ At the margin owner must be indifferent to the period in
which the last unit of stock is extracted
â€¢ With constant price and cost function parameters,
basic model trades minimizing cost by equalizing
extraction across all time periods with net revenue
being worth less in later periods due to discounting
â€¢ The key feature is setting discounted net revenue
in each time period equal to Î»
â€¢ This ties all the time periods together using r
â€¢ In a model with constant prices and zero marginal
cost price rises exponentially at rate r so that:
â€¢ Simple versions of the model have the quantity
produced starting high and falling over time
â€¢ Price does the opposite
â€¢ More realistic version of the Hotelling model produce
very different patterns of production/price by allowing:
â€¢ Changes in demand over time
â€¢ Forms of industrial organization other the pure competition
â€¢ Changes in the cost function (technological change)
â€¢ New discoveries
â€¢ Backstop technologies (particularly if they vary over time)
â€¢ Various types of uncertainty
Inflation-adjusted price of crude oil
(West Texas Intermediate, 2008 dollars)
1945 1955 1965 1975 1985 1995 2005
Hubbert Peak Oil Theory
â€¢ Oil production in a particular region/country has a bell
shape distribution (normal/logistic)
â€¢ Result of lots of different exploration decisions with
production trailing 3+ decades
â€¢ Predicted peak for continental U.S. of around 1970
â€¢ Approximately correct peak annual production and cumulative
â€¢ Predicted peak for World around 2005
â€¢ Approximately correct for cumulative production
â€¢ Substantially under-predicted (32%) annual production
â€¢ Intense debate as to whether we are at peak oil production
â€¢ Implication if we are:
â€¢ Short term: dramatically higher gasoline prices
â€¢ Higher prices for oil intensive products (food, plastic)
â€¢ Long term: quicker substitution toward
â€¢ Higher gas mileage vehicles
â€¢ Alternative fuels
â€¢ Hubbert view of world oil production highly influential
â€¢ Follows from engineering not an economic perspective
â€¢ Does not logically follow from simple Hotelling theory
â€¢ But maybe consistent with it given some reasonable
assumptions about demand over time and technological change
â€¢ In particular, demand low initially and increases over time
â€¢ See Holland (2008) paper for more details
â€¢ Underlying mathematical model is usually given as:
â€¢ Q(t) = Q(Max)/(1 â€“ Î±EXP(-Î²t)
â€¢ t(Max) = (1/Î²)ln(Î±)
â€¢ Variant of logistic growth function
â€¢ Surprising disagreements of statistical fitting of model
Hubbertâ€™s 1956 Prediction
Peak Oil: Discovery and Production
Eventual Gross New Capacity from Projects Coming on Line in 2008
Global decline rate of 4%/year means need 3.4 mb/d in new gross capacity
every year to keep global production from falling
United Statesâ€”Texas, Alaska, Total
Other Indicators of Change
Distribution of Primary Energy Use
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
There is a very low likelihood that you won’t like the paper.
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more