ECONOMICS OF PETROLEUM AS A NATURAL RESOURCE

TEAM Abimanyu NN Jayaprakash M Shweta J Bharani S Santra edit Click to HR Master subtitle style

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Introduction

Basic economic model of a market Adam Smith in 1776 Under assumptions of perfect competition, the market price acts to equilibrate supply and demand. Supply and demand of petroleum Highly unbalanced OPEC
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Model of Supply and Demand

General Framework Each market t D Demand ; S - Supply pt Price of oil; qt Quantity of oil transacted xt Vector of covariates characterizing the market D(qt) [pt;xt] = S(qt) [pt;xt]
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Model of Supply and Demand

Simultaneity Problem Linear Market Model Demand and Supply functions are linear Simplification of Estimation Useful Benchmark in future work

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Oil Production Over The Years

US Dollars per Dubai $/bbl Barrel 1975 1980 1985 1990 1995 2000 2005 2010 10.70 35.69 27.53 20.45 16.10 26.20 49.35 78.06 Brent $/bbl Nigerian Forcados $/bbl 36.93 27.56 23.73 17.02 28.50 54.52 79.50 36.98 27.75 23.85 17.26 28.42 55.69 81.05 West Texas Intermediate $/bbl 37.96 27.99 24.50 18.42 30.37 56.59 79.45

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Oil Production Over The Years

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Oil Production Over The Years

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Peak Oil Scenario

Point in time - Maximum rate of global petroleum extraction is reached Hubbert Curve

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Peak Oil Scenario

Hubbert Peak Theory

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Peak Oil Scenario

Price of oil - Economic recessions 1973 and 1979 energy crises Peak oil - Viewed as positive event Mitigation of peak oil Economist Michael Lynch - Hubbert curve is too simplistic The Canadian oil sands
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Economical Solutions

Narrowing supply-demand gap. Reducing extraction cost. Use of renewable and substitute products. Competition among OPEC and non-OPEC. Innovation for reducing energy consumption per GDP. Exploring new resource sites. Click to edit Master subtitle style

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References

The Journal of Energy and Development, C.Y Cynthia Lin, . Volume 34, Number 1 "Nuclear Energy and the Fossil Fuels, M. King Hubbert, Drilling and Production Practice (1956) American Petroleum Institute & Shell Development Co. Publication No. 95 How General is the Hubbert 4/28/12 Curve?, Ugo Bardi and Leigh Yaxley,

References

Oil and the Future, Richard Reese 2007 BP Statistical Review of World Energy, June 2011

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THANK YOU

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