Depletion and development: natural resource supply with endogenous field opening
Anthony Venables ()
No 554, Economics Series Working Papers from University of Oxford, Department of Economics
This paper develops a model in which supply of a non-renewable resource can adjust through two margins: the rate of depletion and the rate of field opening. Faster depletion of existing fields means that less of the resource can ultimately be extracted, and optimal depletion of open fields follows a (modified) Hotelling rule. Opening a new field involves sinking a capital cost, and the timing of field opening is chosen to maximize the present value of the field. Output dynamics depend on both depletion and field opening, and supply responses to price changes are studied. In contrast to Hotelling, the long run equilibrium rate of growth of prices is independent of the rate of intereset, depending instead on characteristics of demand and geologically determined supply.
Keywords: Natural resource; Depletion; Hotelling; Fossil fuel; Carbon tax (search for similar items in EconPapers)
JEL-codes: Q3 Q5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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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:wpaper:554
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