Modelling the costs of non-conventional oil: A case study of Canadian bitumen
AbstractHigh crude oil prices, uncertainties about the consequences of climate change and the eventual decline of conventional oil production raise the issue of alternative fuels, such as non-conventional oil and biofuels. This paper describes a simple probabilistic model of the costs of non-conventional oil, including the role of learning-by-doing in driving down costs. This forward-looking analysis quantifies the effects of both learning and production constraints on the costs of supplying alternative fuels. The results show large uncertainties in the future costs of supplying synthetic crude oil from bitumen deposits, with a 90% confidence interval of $7 to $11 in 2025, and $6 to $13 in 2050. The influence of each parameter on the supply costs is examined, with the minimum supply cost, the learning rate, and the depletion curve exponent having the largest influence. Over time, the influence of the learning rate on the supply costs decreases, while the influence of the depletion curve exponent increases.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0810.
Date of creation: Feb 2008
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Web page: http://www.econ.cam.ac.uk/index.htm
Climate change; Non-conventional oil; Exhaustible resources; Technological change; Uncertainty;
Other versions of this item:
- Méjean, Aurélie & Hope, Chris, 2008. "Modelling the costs of non-conventional oil: A case study of Canadian bitumen," Energy Policy, Elsevier, vol. 36(11), pages 4205-4216, November.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-13 (All new papers)
- NEP-BEC-2008-06-13 (Business Economics)
- NEP-ENE-2008-06-13 (Energy Economics)
- NEP-ENV-2008-06-13 (Environmental Economics)
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