A policy-impact model for the supply of depletable resources with applications to crude oil

Martin O. Stern

Energy, 1977, vol. 2, issue 3, 257-272

Abstract: In the exploitation of many depletable resources, two separate investment activities can be distinguished that must take place if production is to continue in an orderly fashion: exploration and development. This paper describes a quasi-equilibrium model for these activities, based on competitive behavior within the industry, on slowly rising exploration costs, and on a price-inelastic demand. It is shown that if, with advancing depletion, exploration costs rise markedly and development costs relatively less, a little-recognized user cost arises that can be quantified. This user cost engenders a rental that may exert an even stronger upward pressure on the price of the extracted resource than the better known scarcity rent.

Date: 1977
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:2:y:1977:i:3:p:257-272

DOI: 10.1016/0360-5442(77)90030-5

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