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The Economics of Peak Oil

Author

Listed:
  • Holland, Stephen

    (University of North Carolina at Greensboro, Department of Economics)

Abstract

“Peak oil” refers to the future decline in world production of crude oil and to the accompanying potentially calamitous effects. The peak oil literature typically rejects economic analysis. This chapter, following Holland (2008), argues that economic analysis is indeed appropriate for analyzing oil scarcity since standard economic models can replicate the observed peaks in oil production. Moreover, the emphasis on peak oil is misplaced since peaking is not a good indicator of scarcity, peak oil techniques are overly simplistic, the catastrophes predicted by the peak oil literature are unlikely, and the literature does not contribute to correcting identified market failures. Efficiency of oil markets could be improved by instead focusing on remedying market failures such as excessive private discount rates, environmental externalities, market power, insufficient innovation incentives, incomplete futures markets, and insecure property rights.

Suggested Citation

  • Holland, Stephen, 2011. "The Economics of Peak Oil," UNCG Economics Working Papers 11-13, University of North Carolina at Greensboro, Department of Economics.
    • Handle: RePEc:ris:uncgec:2011_013
    as

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    References listed on IDEAS

    as
    1. Brown, Gardner M, Jr & Field, Barry C, 1978. "Implications of Alternative Measures of Natural Resource Scarcity," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 229-243, April.
    2. Stephen P. Holland, 2008. "Modeling Peak Oil," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 61-80.
    3. Pindyck, Robert S, 1978. "The Optimal Exploration and Production of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 841-861, October.
    4. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    5. Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Taking peak oil seriously
      by Economic Logician in Economic Logic on 2011-09-02 19:44:00

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    More about this item

    Keywords

    Depletable resources; Hotelling; peak oil;
    All these keywords.

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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