IDEAS home Printed from
   My bibliography  Save this article

The Economic Evolution of Petroleum Property Rights in the United States


  • Libecap, Gary D
  • Smith, James L


We 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.

Suggested Citation

  • Libecap, Gary D & Smith, James L, 2002. "The Economic Evolution of Petroleum Property Rights in the United States," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages 589-608, June.
  • Handle: RePEc:ucp:jlstud:v:31:y:2002:i:2:p:s589-608

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    1. Joskow, Paul L, 1988. "Asset Specificity and the Structure of Vertical Relationships: Empirical Evidence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 95-117, Spring.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Gary D. Libecap, 2014. "Addressing Global Environmental Externalities: Transaction Costs Considerations," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 424-479, June.
    2. 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.
    3. Edwyna Harris, 2007. "Dams And Disputes: Water Institutions In Colonial New South Wales, Australia, 1850-1870," Monash Economics Working Papers 08-07, Monash University, Department of Economics.
    4. Karen Maguire, 2013. "Drill Baby Drill? Political and Market Influences on Federal Onshore Oil and Gas Leasing in the Western United States," Economics Working Paper Series 1401, Oklahoma State University, Department of Economics and Legal Studies in Business, revised Apr 2013.
    5. Gary D. Libecap, 2013. "Addressing Global Environmental Externalities: Transaction Costs Considerations," NBER Working Papers 19501, National Bureau of Economic Research, Inc.
    6. Hawke, Richard, 2006. "Improving the Water Allocation Framework in New Zealand," Occasional Papers 06/9, Ministry of Economic Development, New Zealand.
    7. Richard G. Newell & Brian C. Prest & Ashley Vissing, 2016. "Trophy Hunting vs. Manufacturing Energy: The Price-Responsiveness of Shale Gas," NBER Working Papers 22532, National Bureau of Economic Research, Inc.
    8. Gary D. Libecap, 2010. "Water Rights and Markets in the U.S. Semi Arid West: Efficiency and Equity Issues," ICER Working Papers 30-2010, ICER - International Centre for Economic Research.
    9. Karen Maguire, 2016. "Drill baby drill? Political influence on federal onshore oil and gas leasing in the Western United States," Economics of Governance, Springer, vol. 17(2), pages 131-164, May.
    10. 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.
    11. 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.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:v:31:y:2002:i:2:p:s589-608. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.