The Economic Evolution of Petroleum Property Rights in the United States
AbstractWe examine Harold Demsetz's prediction that property rights emerge as the benefits of doing so exceed the costs in the context of oil and gas resources in the United States. Familiar influences on the development of petroleum property rights, technology, market demand, and politics provide support for the hypothesis. Our primary contribution is to demonstrate the important role of a less familiar factor, the presence in the reservoir of both oil and gas with differentially volatile prices. This factor has affected the nature of the property rights assigned with unitization, an institutional arrangement to internalize the common-pool externality. Information asymmetries and conflicting price expectations have resulted in unit agreements that would not have been predicted in a strict neoclassical sense. Our analysis provides new insights into the nature of voluntary unitization contracts, inherent limits to producers' ability to internalize externalities, and the welfare implications of compulsory unitization. Copyright 2002 by the University of Chicago.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Legal Studies.
Volume (Year): 31 (2002)
Issue (Month): 2 (June)
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Web page: http://www.journals.uchicago.edu/JLS/
Other versions of this item:
- Gary D. Libecap & James L. Smith, 2002. "The economic evolution of petroleum property rights in the United States," ICER Working Papers 25-2002, ICER - International Centre for Economic Research.
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- Gary Libecap, 2007. "Regulation and Deregulation: Property Rights Allocation Issues in De Regulation of Common Pool Resources," ICER Working Papers 28-2007, ICER - International Centre for Economic Research.
- Boyce, John R. & Nøstbakken, Linda, 2011. "Exploration and development of U.S. oil and gas fields, 1955-2002," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 891-908, June.
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- Hawke, Richard, 2006. "Improving the Water Allocation Framework in New Zealand," Occasional Papers 06/9, Ministry of Economic Development, New Zealand.
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- Bhattacharya, Haimanti & Lueck, Dean, 2009. "The role of property rights in determining the environmental quality-income relationship," Ecological Economics, Elsevier, vol. 68(10), pages 2511-2524, August.
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