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The Oil Extraction Puzzle: Theory and Evidence

Listed author(s):
  • Andrew Pickering

This paper considers the relationship between the extraction rates and remaining reserves of a non-renewable resource. Linear extraction rules are derived wherein the slope term is the same regardless of the cost parameters and market structure whilst differences are captured by the intercept. Using data from the world oil industry the implied test could not be rejected for the case of 1981 but failed using the 1991 and 2000 data. Latterly, either OPEC members are apparently extracting too slowly or non-OPEC countries are extracting too quickly. Three alternative resolutions of this puzzle are offered.

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Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 02/534.

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Length: 24 pages
Date of creation: Jul 2002
Handle: RePEc:bri:uobdis:02/534
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