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Optimal management of strategic reserves of nonrenewable natural resources

Eric Bahel ()

Journal of Environmental Economics and Management, 2011, vol. 61, issue 3, 267-280

Abstract: This paper studies the stockpiling issue for an oil importing country that is likely to suffer embargoes, the occurrence and duration of which are uncertain. I show the existence of a decreasing reserves path that the country wants to attain in order to hedge against these disruptions. Allowing the importing country to invest in R&D in order to free itself from the embargo threat, I determine the optimal effort that should be engaged in research. The incentive to develop a backstop is shown to increase with the depletion of the reserves.

Keywords: Imports; Nonrenewable; resource; Random; embargoes; Strategic; reserves (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:61:y:2011:i:3:p:267-280

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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