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The oil extraction puzzle: theory and evidence


  • Pickering, Andrew

    (University of Bristol)


This paper considers the relationship between the extraction rates and remaining reserves of a non-renewable resource. Under general conditions the derived extraction rule is firstly linear, and secondly exhibits a slope term common to all extractors regardless of pricing behaviour and costs whilst differences are captured by the intercept. Data from the world oil industry supports the hypothesis of linearity but the implied test was rejected in some cases. Latterly, it appears that either OPEC members are discounting at a higher rate than the competitive fringe or they are overstating their reserve levels.

Suggested Citation

  • Pickering, Andrew, 2003. "The oil extraction puzzle: theory and evidence," Royal Economic Society Annual Conference 2003 166, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:166

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    oil; OPEC; extraction; reserves; resources;

    JEL classification:

    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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