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Short run effects of bleaker prospects for oligopolistic producers of a non-renewable resource

Kristine Grimsrud, Knut Einar Rosendahl (), Halvor Briseid Storrøsten and Marina Tsygankova
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Marina Tsygankova: Statistics Norway,

Discussion Papers from Statistics Norway, Research Department

Abstract: In a non-renewable resource market with imperfect competition, the resource owners' supply is governed both by current demand and by the resource rent. New information regarding future market conditions will typically affect the resource rent and hence current supply. Bleaker prospects will tend to accelerate extraction. We show, however, that for resource owners with substantial resource stocks, a more pessimistic outlook may in fact slow down early extraction. The explanation is that for players with extensive resource stocks, the resource rent is limited and supply is more driven by current market considerations. As players with less resources accelerate their supply, it may be optimal for the large resource owners to cut back on their supply. We illustrate this in the case of the European gas market, finding that the shale gas revolution may lead to an accelerated supply by most gas producers, but a postponement of Russian gas extraction.

Keywords: Exhaustible Resource Extraction; Cournot Competition; Natural Gas. (search for similar items in EconPapers)
JEL-codes: D43 Q31 Q41 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-env
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Related works:
Journal Article: Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-renewable Resource (2016) Downloads
Working Paper: Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-Renewable Resource (2014) Downloads
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