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Non-renewable resources and growth, the case of the oil: a simple endogenous model

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  • Fabbri, Giorgio

Abstract

We present a growth model in which a non-renewable resource enters in the production function. The non-renewable resource is supposed to be sold by an external monopolistic that maximizes his intertemporal discounted cash flow. This approach allows to endogenize the price of the resource. We use the historical data of the oil price and of the oil production to calibrate the model. The forecasts of the model about the evolution of the GDP growth rate, the price and amount of the production of the oil are described. The formulation of the model is quite easy but it hallows to obtain a good fit with the recent data and especially with the behavior of the three main quantities considered (oil price, oil supply and GDP growth rate) in the last years. Indeed the recent data suggest a new scenario and probably a progressive reduction of the world oil supply (and an indefinite growth of the prices). The model suggests that such a behavior is not due to the imminent physical end of the oil but has a clear economic explanation.

Suggested Citation

  • Fabbri, Giorgio, 2007. "Non-renewable resources and growth, the case of the oil: a simple endogenous model," MPRA Paper 5718, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5718
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    References listed on IDEAS

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    More about this item

    Keywords

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    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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