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Economic Theory and the Supply of Oil


  • Banks, Ferdinand

    () (Department of Economics)


This paper is concerned with four things. First, establishing the importance of the reserve-production ratio, and its significance relative to the 'life' of the oil reserves. Next, providing a simple derivation and discussion of Hotelling's theorem, while claiming its inadequacy for discussing physical as compared to financial assets. I then consider the short term pricing of oil presenting a simplified exposition of the 'convenience yield', and the part it plays in the term structure of oil prices. Finally, I take a look at a recent argument which claims that in reality there will not be an increased dependence of Middle East oil in the near or distant future. There is also a short conclusion in which some forecasts of the demand for oil in the years 2000 and 2010 are given.

Suggested Citation

  • Banks, Ferdinand, 1998. "Economic Theory and the Supply of Oil," Working Paper Series 1997:22, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:1997_022

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    More about this item


    Reserve-produduction ratio; hotelling; convenience yield; oil reserves;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices


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