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Fundamental Economics of Depletable Energy Supply


  • Toman, Michael
  • Krautkraemer, Jeffrey


In this paper, we first present and discuss the basic logic underlying all neoclassical economic theories of “optimal” energy supply: maximization of the present value of some stream of economic returns. We then discuss how the economic theory of optimal resource depletion has evolved since Hotelling’s classic 1931 article. We also consider the power of the theory to support improved empirical understanding of actual behavior. Our discussion of empirical literature indicates that this work has so far provided only limited empirical understanding.

Suggested Citation

  • Toman, Michael & Krautkraemer, Jeffrey, 2003. "Fundamental Economics of Depletable Energy Supply," Discussion Papers dp-03-01, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-03-01

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    References listed on IDEAS

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    7. Margaret A. Walls, 1994. "Using a 'Hybrid' Approach to Model Oil and Gas Supply: A Case Study of the Gulf of Mexico Outer Continental Shelf," Land Economics, University of Wisconsin Press, vol. 70(1), pages 1-19.
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    Cited by:

    1. Marc Gronwald, 2009. "Jumps in Oil Prices- Evidence and Implications," ifo Working Paper Series 75, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Heun, Matthew Kuperus & de Wit, Martin, 2012. "Energy return on (energy) invested (EROI), oil prices, and energy transitions," Energy Policy, Elsevier, vol. 40(C), pages 147-158.
    3. Méjean, Aurélie & Hope, Chris, 2008. "Modelling the costs of non-conventional oil: A case study of Canadian bitumen," Energy Policy, Elsevier, vol. 36(11), pages 4205-4216, November.
    4. Alan Gelb & Kai Kaiser & Lorena Viñuela, 2012. "How Much Does Natural Resource Extraction Really Diminish National Wealth? The Implications of Discovery," Working Papers id:4874, eSocialSciences.
    5. Méjean, Aurélie & Hope, Chris, 2013. "Supplying synthetic crude oil from Canadian oil sands: A comparative study of the costs and CO2 emissions of mining and in-situ recovery," Energy Policy, Elsevier, vol. 60(C), pages 27-40.
    6. Barril, Diego & Navajas, Fernando H., 2011. "What drove down natural gas production in Argentina?," MPRA Paper 35726, University Library of Munich, Germany, revised Nov 2011.
    7. Brandt, Adam R., 2010. "Review of mathematical models of future oil supply: Historical overview and synthesizing critique," Energy, Elsevier, vol. 35(9), pages 3958-3974.
    8. Alan Gelb, Kai Kaiser, and Lorena Vinuela, 2012. "How Much Does Natural Resource Extraction Really Diminish National Wealth? The Implications of Discovery - Working Paper 290," Working Papers 290, Center for Global Development.
    9. Luo, Dongkun & Zhao, Xu, 2012. "Modeling the operating costs for petroleum exploration and development projects," Energy, Elsevier, vol. 40(1), pages 189-195.

    More about this item


    depletable resources; energy; intertemporal optimization;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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