Hotelling Revisited: Oil Prices and Endogenous Technological Progress |
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| Authors: | C-Y Cynthia Lin Haoying Meng Tsz Yan Ngai Valeria Oscherov Yan Hong Zhu |
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| Institution: | (1) Agricultural and Resource Economics, University of California at Davis, One Shields Avenue, Davis, CA 95616, USA;(2) Mathematics, University of California at Davis, One Shields Avenue, Davis, CA 95616, USA;(3) Applied Mathematics, University of California at Davis, One Shields Avenue, Davis, CA 95616, USA |
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| Abstract: | This article examines the Hotelling model of optimal nonrenewable resource extraction in light of empirical evidence that
petroleum and minerals prices have been trendless despite resource scarcity. In particular, we examine how endogenous technology-induced
shifts in the cost function would have evolved over time if they were to maintain a constant market price for nonrenewable
resources. We calibrate our model using empirical data on world oil, and find that, depending on the estimate of the initial
stock of reserve, oil reserves will likely be depleted some time between the years 2040 and 2075. |
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| Keywords: | Optimal nonrenewable resource oil reserve depletion Hotelling rule world oil market |
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