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Optimal Management of Strategic Reserves of Nonrenewable Natural Resources

Eric Bahel ()

Working Papers from Virginia Polytechnic Institute and State University, Department of Economics

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)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2010
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ftp://repec.econ.vt.edu/Papers/Bahel/paper_oil%20reserves_WP.pdf First version, 2010 (application/pdf)
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Journal Article: Optimal management of strategic reserves of nonrenewable natural resources (2011) Downloads
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