The Economic and Environmental Consequences of the Petroleum Industry Extensive Margin

Giacomo Benini (), Adam Brandt (), Valerio Dotti and Hassan El-Houjeiri
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Giacomo Benini: Department of Business and Management Science, NHH
Adam Brandt: Department of Energy Resource Engineering, Stanford University
Hassan El-Houjeiri: Technology Outlook, Strategy & Planning Dept., Saudi Aramco

No 2023:14, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: The recent diffusion of novel oil technologies has increased the variability of petroleum resources. Today, it is possible to mine oil sands, to extract liquids from tight rocks, and to produce high-viscosity oils. Merging accounting and environmental data, we quantify the upstream emissions of the least profitable oilfields. According to our estimates thirteen fields, responsible for the production of 0.72 million barrels per day, represent the 1% extensive margin of the industry. These formations are Heavy & Extra Heavy and Sands deposits. Their average upstream carbon intensity is 114.61 KgCO2e per barrel versus a global average of 54.35. Similar results are obtained widening the extensive margin to 2.5% and 5%. This finding suggests that a fall in the global oil demand of 1% can reduce upstream emissions by 24.95 MMtCO2e per year, the annual footprint of 5.3% of all the cars registered in the United States.

Keywords: Oil Economics; Shadow Prices; Empirical Analysis of Firm Behavior; Panel Data; Co-integration; Endogeneity; Linear Mixed Models (search for similar items in EconPapers)
JEL-codes: C14 C23 D22 L23 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023
New Economics Papers: this item is included in nep-ene and nep-env
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