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Understanding Oil Cycle Dynamics to Design the Future Economy

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  • Luis Enrique Garcia

    (ESE, IPN)

  • Aude Illig

    (University of Toulouse 1, Capitole)

  • Ian Schindler

    (CNRS UMR 5219, University of Toulouse 1, Capitole)

Abstract

In this work, we make the ansatz that economic production is reduced to the energy made available to the economy. In (Illig and Schindler, BioPhys Econ Resour Qual 2(1):1, 2017) the price of oil was expressed as a function of the size of the economy, the cost share of oil, and the quantity of oil extracted. We clarify assumptions needed to use this explicit price equation to study prices. Using the current extraction rate, the previous year’s extraction rate, and interest rates of the Federal Reserve we use linear regression to give a model for oil prices from 1966 to 2018. The model verifies that deductions made from the explicit price equation are consistent with empirical data over the given time period. Our analysis indicates that the contraction phase of world oil extraction began in 2020 and that it will be characterized by relatively low oil prices. We present some challenges and opportunities for building a future economy if our assumptions prove valid.

Suggested Citation

  • Luis Enrique Garcia & Aude Illig & Ian Schindler, 2020. "Understanding Oil Cycle Dynamics to Design the Future Economy," Biophysical Economics and Resource Quality, Springer, vol. 5(4), pages 1-17, December.
    • Handle: RePEc:spr:bioerq:v:5:y:2020:i:4:d:10.1007_s41247-020-00081-4
    DOI: 10.1007/s41247-020-00081-4
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    References listed on IDEAS

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    Cited by:

    1. André Månberger, 2021. "Reduced Use of Fossil Fuels can Reduce Supply of Critical Resources," Biophysical Economics and Resource Quality, Springer, vol. 6(2), pages 1-15, June.
    2. Dong, Yangzi & Wong, Wing-Keung & Muda, Iskandar & Cong, Phan The & Duong Hoang, Anh & Ghardallou, Wafa & Ha, Ngo Ngan, 2023. "Do natural resources utilization and economic development reduce greenhouse gas emissions through consuming renewable and Clean Technology? A case study of China towards sustainable development goals," Resources Policy, Elsevier, vol. 85(PB).
    3. Saeed Solaymani, 2022. "Global Energy Price Volatility and Agricultural Commodity Prices in Malaysia," Biophysical Economics and Resource Quality, Springer, vol. 7(4), pages 1-21, December.

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