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The supply of non-renewable resources

Author

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  • Julien Daubanes
  • Pierre Lasserre

Abstract

There exists no formal treatment of non-renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location depends not only on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own-price effect, cross-price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: a price increase at some point in space and time causes NRR supply to decrease at all other points. Our newalthough orthodoxsetting takes into account not only NRR supply limitations but also the heterogeneity of NRR deposits, and the endogeneity of their development and opening. Our analysis extends to NRRs the partial-equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of results about policy-induced changes on NRR markets.

Suggested Citation

  • Julien Daubanes & Pierre Lasserre, 2019. "The supply of non-renewable resources," Canadian Journal of Economics, Canadian Economics Association, vol. 52(3), pages 1084-1111, August.
    • Handle: RePEc:cje:issued:v:52:y:2019:i:3:p:1084-1111
    DOI: 10.1111/caje.12394
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    Cited by:

    1. Lafforgue, Gilles & Rouge, Luc, 2019. "A dynamic model of recycling with endogenous technological breakthrough," Resource and Energy Economics, Elsevier, vol. 57(C), pages 101-118.
    2. Cotrina-Teatino, Marco A. & Marquina-Araujo, Jairo J., 2024. "Hotelling rule in non-renewable resources: A bibliometric and systematic literature review analysis," Resources Policy, Elsevier, vol. 98(C).
    3. Sylwia Bialek & Alfons J. Weichenrieder, 2022. "Should the global community welcome new oil discoveries?," Journal of Economics, Springer, vol. 137(3), pages 255-278, December.

    More about this item

    JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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