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How do unanticipated discoveries of oil fields affect the oil price?

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Abstract

The Hotelling rule argues that the price for a nonrenewable resource adjusts to the shadow value of the resource, reflecting the remaining availability of the resource. We empirically test the Hotelling rule on the effect of unanticipated oil field discoveries. We do not find evidence for a significant adjustment of the price of crude oil to news about greater resource availability and therefore conclude that the price for crude oil does not follow the theoretically optimal price path.

Suggested Citation

  • Lisa Leinert, 2010. "How do unanticipated discoveries of oil fields affect the oil price?," CER-ETH Economics working paper series 10/140, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:10-140
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    File URL: https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-10-140.pdf
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    More about this item

    Keywords

    Nonrenewable Resource; Oil Price; Exhaustible Resources; Information Acquisition;
    All these keywords.

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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