Annual Energy Outlook

Two-person Cooperative Games

Uncertainties in projections of future climate change have not lessened substantially in past decades. Both models and observations yield broad probability distributions for long-term increases in global mean temperature expected from the doubling of atmospheric carbon dioxide, with small but finite probabilities of very large increases. We show that the shape of these probability distributions is an inevitable and general consequence of the nature of the climate system, and we derive a simple analytic form for the shape that fits recent published distributions very well. We show that the breadth of the distribution and, in particular, the probability of large temperature increases are relatively insensitive to decreases in uncertainties associated with the underlying climate processes.

Why is climate sensitivity so unpredictable

Differential Games in Economics and Management Science: Stochastic differential games

We show that oil production from existing wells in Texas does not respond to price incentives. Drilling activity and costs, however, do respond strongly to prices. To explain these facts, we reformulate Hotelling's (1931) classic model of exhaustible resource extraction as a drilling problem: firms choose when to drill, but production from existing wells is constrained by reservoir pressure, which decays as oil is extracted. The model implies a modified Hotelling rule for drilling revenues net of costs and explains why production is typically constrained. It also rationalizes regional production peaks and observed patterns of price expectations following demand shocks.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2537827_code1108470.pdf?abstractid=2537827&mirid=1

Hotelling Under Pressure

Geological constraints are considered in the context of a Hotelling type extraction-exploration model for an exhaustible resource. It is shown that such constraints, in combination with initially small reserves and strictly convex exploration costs, can coherently explain bellshaped peaks in natural resource extraction, and hence U-shapes in prices. As production increases, marginal profits (marginal revenues less marginal extraction cost) are observed to decline, while as production decreases, marginal profits rise at a positive rate that is not necessarily the rate of discount. A numerical application of the model to the world oil market shows that geological constraints have the potential to substantially increase the future oil price. While some non-OPEC producers are found to increase production in response to higher oil prices induced by the geological constraints, most producers’ production declines, leading to a lower peak level for global oil production.

/pdf/modeling-peak-oil-and-the-geological-constraints-on-oil-14kddow60e.pdf

Modeling Peak Oil and the Geological Constraints on Oil Production

Modeling peak oil and the geological constraints on oil production

https://cyberleninka.org/article/n/1446748.pdf

Imperfect cartelization in OPEC

https://ecomod.net/sites/default/files/document-conference/ecomod2010/1301.pdf

Can reserve additions in mature crude oil provinces attenuate peak oil

This article compares the advantages and limits of the two main methods used in the literature to model oil production: the technical Hubbert approach and the economic Hotelling approach. We argue that the technical approach can be nested in the economic approach by showing that a technical or geological constraint can be reinterpreted as a cost constraint. This provides an economic foundation for Hubbert’s peak oil model. As profitability is the main driver behind production plans, we show that changes in profitability due to divergent trajectories between costs and oil price may give rise to a Hubbert production curve. For this result we do not need to introduce a decreasing cost effect as is generally assumed in the literature.

/pdf/how-does-economic-theory-explain-the-hubbert-peak-oil-model-4bh7m5enth.pdf

Samuel Jovan Okullo

Papers

Modeling Peak Oil and the Geological Constraints on Oil Production

Modeling peak oil and the geological constraints on oil production

Imperfect cartelization in OPEC

Can reserve additions in mature crude oil provinces attenuate peak oil

How Does Economic Theory Explain the Hubbert Peak Oil Model