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The tug-of-war between resource depletion and technological change in the global oil industry 1981 - 2009

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    Abstract

    We perform an empirical analysis of the extent to which ongoing technological change through R&D activity has offset the effect of ongoing depletion on the cost of finding additional reserves of oil in eight global regions. We introduce a finding cost function that among other factors depends on the cumulative number of past R&D expenses and cumulative past production, measuring technological change and depletion, respectively. For all our regions we find significant effects of both depletion and technological change on oil finding costs from 1981 to 2009, barring cyclical variations in finding costs that could come from changes in factor prices. For almost all regions technology more than mitigated depletion until around the mid-nineties. However, we find that depletion outweighed technological progress over the last decade.

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    Bibliographic Info

    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 732.

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    Date of creation: Jan 2013
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    Handle: RePEc:ssb:dispap:732

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    Keywords: Oil; depletion; technological change; R&D; finding costs;

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    1. Marie N. Fagan, 1997. "Resource Depletion and Technical Change: Effects on U.S. Crude Oil Finding Costs from 1977 to 1994," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 91-105.
    2. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    3. Osmundsen, Petter & Roll, Kristin Helen & Tveteras, Ragnar, 2012. "Drilling speed—the relevance of experience," Energy Economics, Elsevier, vol. 34(3), pages 786-794.
    4. Reynolds, Douglas B., 1999. "The mineral economy: how prices and costs can falsely signal decreasing scarcity," Ecological Economics, Elsevier, vol. 31(1), pages 155-166, October.
    5. Petter Osmundsen & Knut Einar Rosendahl & Terje Skjerpen, 2013. "Understanding Rig Rates," CESifo Working Paper Series 4532, CESifo Group Munich.
    6. Alexander Kemp & Sola Kasim, 2006. "A Regional Model Of Oil And Gas Exploration In The Ukcs," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 198-221, 05.
    7. Managi, Shunsuke & Opaluch, James J. & Jin, Di & Grigalunas, Thomas A., 2004. "Technological change and depletion in offshore oil and gas," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 388-409, March.
    8. Robert Wieser, 2005. "Research And Development Productivity And Spillovers: Empirical Evidence At The Firm Level," Journal of Economic Surveys, Wiley Blackwell, vol. 19(4), pages 587-621, 09.
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