Modelling the costs of non-conventional oil: A case study of Canadian bitumen

Aurélie Méjean and Chris Hope

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: High crude oil prices, uncertainties about the consequences of climate change and the eventual decline of conventional oil production raise the issue of alternative fuels, such as non-conventional oil and biofuels. This paper describes a simple probabilistic model of the costs of non-conventional oil, including the role of learning-by-doing in driving down costs. This forward-looking analysis quantifies the effects of both learning and production constraints on the costs of supplying alternative fuels. The results show large uncertainties in the future costs of supplying synthetic crude oil from bitumen deposits, with a 90% confidence interval of $7 to $11 in 2025, and $6 to $13 in 2050. The influence of each parameter on the supply costs is examined, with the minimum supply cost, the learning rate, and the depletion curve exponent having the largest influence. Over time, the influence of the learning rate on the supply costs decreases, while the influence of the depletion curve exponent increases.

Keywords: Climate change; Non-conventional oil; Exhaustible resources; Technological change; Uncertainty (search for similar items in EconPapers)
JEL-codes: C15 Q32 Q42 Q55 (search for similar items in EconPapers)
Pages: 24
Date: 2008-02
New Economics Papers: this item is included in nep-bec, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Modelling the costs of non-conventional oil: A case study of Canadian bitumen (2008)
Working Paper: Modelling the costs of non-conventional oil: A case study of Canadian bitumen (2008)
Working Paper: Modelling the costs of non-conventional oil: A case study of Canadian bitumen (2008)
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