Depletion and Development: Natural resounce supply with endogenous field opening

Anthony Venables

No 62, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: Supply of a non-renewable resource adjusts through two margins: the rate at which new fields are opened, and the rate of depletion of open fields. The paper combines these margins in a model in which there is a continuum of fields with varying capital costs. Opening a new field involves sinking a capital cost, and the date of opening is chosen to maximize the present value of the field. Depletion of each open field follows a Hotelling rule, modified by the fact that faster depletion reduces the amount that can ultimately be extracted. The paper studies the equilibrium paths of output and price. Under specific but reasonable assumptions on demand and the cost distribution of deposits it is found that the rate of growth of price is constant and independent of the rate of interest, depending instead on characteristics of demand and geology.

Keywords: non-renewable resource; depletion; exhaustible; Hotelling; fossil fuel; carbon tax (search for similar items in EconPapers)
JEL-codes: D9 Q3 Q4 Q5 (search for similar items in EconPapers)
Date: 2011-06-20
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Depletion and Development: Natural Resource Supply with Endogenous Field Opening (2014)
Working Paper: Depletion and Development: Natural Resource Supply with Endogenous Field Opening (2011)
Working Paper: Depletion and development: natural resource supply with endogenous field opening (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:062

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