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The elephant in Hotelling's room

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Author Info

  • Hart, Rob
  • Spiro, Daniel

Abstract

This paper questions the assumption, commonly used in theoretical and policy research, that scarcity rents make up a large proportion of market prices for oil and coal. We show that the empirical literature, simple calculations of historical and future scarcity rent shares, and possible theoretical explanations all imply the same overall conclusions: that scarcity rents seem to have been marginal or non-existent historically; that they almost certainly do not dominate fossil resource prices today; and that there will be other factors shaping the prices in the upcoming decades. We therefore argue that using the scarcity rent as the main or only basis for policy or for explaining empirical outcomes is ill-advised.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 39 (2011)
Issue (Month): 12 ()
Pages: 7834-7838

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Handle: RePEc:eee:enepol:v:39:y:2011:i:12:p:7834-7838

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Web page: http://www.elsevier.com/locate/enpol

Related research

Keywords: Resource scarcity; Climate policy; Green paradox;

References

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Citations

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Cited by:
  1. Huppmann, Daniel, 2013. "Endogenous shifts in OPEC market power - A Stackelberg oligopoly with fringe," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79758, Verein für Socialpolitik / German Economic Association.
  2. Martin Stuermer & Gregor Schwerhoff, 2013. "Technological change in resource extraction and endogenous growth," Bonn Econ Discussion Papers bgse12_2013, University of Bonn, Germany.
  3. Goldemberg, José & Schaeffer, Roberto & Szklo, Alexandre & Lucchesi, Rodrigo, 2014. "Oil and natural gas prospects in South America: Can the petroleum industry pave the way for renewables in Brazil?," Energy Policy, Elsevier, vol. 64(C), pages 58-70.
  4. Schade, Jutta & Wallström, Peter & Olofsson, Thomas & Lagerqvist, Ove, 2013. "A comparative study of the design and construction process of energy efficient buildings in Germany and Sweden," Energy Policy, Elsevier, vol. 58(C), pages 28-37.
  5. Niko Jaakkola, 2013. "Green Technologies and the Protracted End to the Age of Oil: A strategic analysis," OxCarre Working Papers 099, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  6. Lund, Diderik & Nymoen, Ragnar, 2013. "Comparative statics for real options on oil: What stylized facts to use?," Memorandum 14/2013, Oslo University, Department of Economics.

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