Extraction Costs and the Economics of Nonrenewable Resources

Natural Resource Prices: Will They Ever Turn Up?

“…Considered in this section are three cases in which prices can be declining or stagnant: the depletion and progress case, the great abundance case, and the environmental constraint case. The depletion and progress case is an extension of Hartwick's model, which is different from the continuous distribution of ore model used by Slade [13] and Livernois and Uhler [8]. That resource rents would be low with great natural abundance seems obvious.…”

“…The statistical models (both TS and DS) for natural resource prices are contained within the transfer function model (8) where t is time; a, b, and c are parameters; Et is a white-noise error process; and <I> and eare polynomials in the lag operator L.…”

“…This will lead to the conclusion that an equation such as (10) or (11) is more appropriate than the general model (8), quadratic model (9), or stationary ARMA model.…”

Depletion and Development: Natural Resource Supply with Endogenous Field Opening

“…This modelling approach is in contrast with much of the literature, where additions to stock are typically modelled as the outcome of a continuous variable (exploration) that adds to the capacity and reduces extraction costs of the existing field (as in Pindyck 1978, Dasgupta andHeal 1979). 3 Existing literature in which there are field set-up costs includes Hartwick et al (1986), Holland (2003), and Livernois and Uhler (1987). Hartwick et al assume zero extraction costs, in which case only one field is operated at any time, and Holland (2003) looks at cases where marginal extraction costs are either constant or infinite.…”

“…Hartwick et al assume zero extraction costs, in which case only one field is operated at any time, and Holland (2003) looks at cases where marginal extraction costs are either constant or infinite. Livernois and Uhler (1987) look at the rate of discovery of new fields with field-specific extraction costs, characterising first order conditions for the problem but doing little subsequent analysis of the equilibrium. We are able to go beyond these models, fully integrating intensive and extensive margin choices.…”