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GTAP Resource #3528

"Peak Oil through the lens of a general assessment"
by Waisman, Henri-David, Julie Rozenberg and Jean-Charles Hourcade


Abstract
Although the popular notion of Peak Oil conveys concerns about the economic consequences of a decline of world oil production, it is remarkable that it still relies on almost purely geological-based analyses which extrapolate the Hubbert prediction of a bell-shaped oil production trend for the US. But such an extrapolation at a global level is questionable since total oil production is governed by the economically driven dynamics of supply and demand.
However, the Hubbert approach points an important determinant for the macrodynamics of oil markets, namely, the limits on the short term adaptability of oil supply that are imposed by the physical constraints on production flows at the field level. One intuition of this paper is that introducing this constraint into the description of producers’ decisions helps to review the notion of Peak Oil. We do so in a hybrid general equilibrium model of the world economy, IMACLIM-R, which includes imperfect foresight and endogenous technical change assumptions and endogenizes Peak Oil as a consequence of market interactions under resource constraint.
With this framework, we provide a quantitative analysis of the long-term economy over 2010-2100 and investigate the drivers of the date and the macroeconomic consequences of Peak Oil. A sensitivity analysis is performed on the amount of oil reserves and technical inertia affecting production in two geopolitical contexts. In the first, Middle-East producers maximize short term oil revenues by limiting the deployment of production capacities; in the second, they deploy these capacities to maintain moderately low oil prices, discourage oil-saving technical change and trigger higher and more sudden prices increases in the post-Peak Oil period. We delineate the space of parameters (discount rate; degree of optimism about oil resources) under which a low short-term oil price may maximize the objective function of oil exporters.


Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Not published
By/In:
Date: 2011
Version:
Created: Waisman, H. (4/12/2011)
Updated: Batta, G. (4/12/2011)
Visits: 697
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