Sustainable Transportation Energy Pathways (STEPS)
Available online at: doi: 10.1007/s11053-008-9086-5
Lin Lawell, C.-Y. Cynthia, Haoying Meng, Tsz Yan Ngai, Valeria Oscherov, Hong Zhu Yan (2009) Hotelling Revisited: Oil Prices and Endogenous Technological Progress. Natural Resources Research 18 (1), 29 - 38
This article examines the Hotelling model of optimal nonrenewable resource extraction in light of empirical evidence that petroleum and minerals prices have been trendless despite resource scarcity. In particular, we examine how endogenous technology-induced shifts in the cost function would have evolved over time if they were to maintain a constant market price for nonrenewable resources. We calibrate our model using empirical data on world oil, and find that, depending on the estimate of the initial stock of reserve, oil reserves will likely be depleted some time between the years 2040 and 2075.
Keywords: optimal nonrenewable resource, oil reserve depletion, Hotelling rule, world oil market