The time path of the marginal cost of oil: The turning point and the subsequent upward drift

The time path of the marginal cost of oil: The turning point and the subsequent upward drift

0.00 Avg rating0 Votes
Article ID: iaor19971941
Country: Netherlands
Volume: 68
Issue: 1
Start Page Number: 409
End Page Number: 422
Publication Date: Nov 1996
Journal: Annals of Operations Research
Authors: , , , , ,
Keywords: economics
Abstract:

The gradual exhaustion of existing deposits of a depletable non-renewable resource such as oil tends to shift the supply price curve of the resource upwards, increasing its marginal cost. Advances in technologies for exploration and production act as a brake on such upward shifts. Thus, there is a tug-of-war between the gradual exhaustion of existing deposits and technological progress. Using a recently developed constrained least-squares regression technique, the authors demonstrate that technological pogress was the dominant force of the two during the first part of this century, causing a secular drop in marginal costs, but that this situation eventually was reversed, and that the gradual exchaustion of deposits gained the upper hand, causing marginal costs to increase. The turning point occurred around 1971-72. The authors also discuss the forecasting of the possible current upward dirft of marginal costs.

Reviews

Required fields are marked *. Your email address will not be published.