TY - JOUR
T1 - Is hotelling's rule relevant to domestic oil production?
AU - Black, Geoffrey
AU - Lafrance, Jeffrey T.
PY - 1998/9
Y1 - 1998/9
N2 - A model of oil supply from known reserves is developed to incorporate geological and engineering principles in the oil field operator's decision problem. Oil production from existing wells within an oil field is isolated from the drilling of new wells. The geo-engineering rule known as maximum efficient recovery (MER) is nested within the economic model to test the hypothesis that production from established fields is invariant to the price of oil. The econometric model is applied to quarterly data from seven Montana oil fields. The MER model is strongly rejected by the data, providing evidence that oil supply models should include economic as well as geo-engineering principles.
AB - A model of oil supply from known reserves is developed to incorporate geological and engineering principles in the oil field operator's decision problem. Oil production from existing wells within an oil field is isolated from the drilling of new wells. The geo-engineering rule known as maximum efficient recovery (MER) is nested within the economic model to test the hypothesis that production from established fields is invariant to the price of oil. The econometric model is applied to quarterly data from seven Montana oil fields. The MER model is strongly rejected by the data, providing evidence that oil supply models should include economic as well as geo-engineering principles.
KW - Hotelling's Rule
KW - Maximum Efficient Recovery
KW - Oil Supply
UR - http://www.scopus.com/inward/record.url?scp=0031687225&partnerID=8YFLogxK
U2 - 10.1006/jeem.1998.1042
DO - 10.1006/jeem.1998.1042
M3 - Article
AN - SCOPUS:0031687225
SN - 0095-0696
VL - 36
SP - 149
EP - 169
JO - Journal of Environmental Economics and Management
JF - Journal of Environmental Economics and Management
IS - 2
ER -