The future of oil: Geology versus technology

Beneš, Jaromí­r; Chauvet, Marcelle; Kamenik, Ondra; Kumhof, Michael; Laxton, Douglas; Mursula, Susanna; Selody, Jack

doi:10.1016/j.ijforecast.2014.03.012

Cited by 64 publications

(32 citation statements)

References 18 publications

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“…Over the long run, physical (geological) constraints should put upward pressure on the real price of oil, although technological advances could slow the increase. Sharply diverging judgments on recoverable reserves and on future price elasticities of oil demand and supply imply that oil price forecasts over the long run are subject to wide error bands (Benes et al 2012). …”

Section: Discussionmentioning

confidence: 99%

“…If oil prices stay around $60 per barrel, roughly one-third of current oil production and more than two-thirds of the expected increase in global oil production could become uneconomical (Bank of Canada 2015). Over time, cost of unconventional oil production is likely to decline as new technologies will reduce the cost of exploration and extraction (Benes et al 2012). (IEA 2014a and.…”

Section: A Developments In Supply and Demandmentioning

confidence: 99%

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The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

Baffes¹,

et al. 2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Following four years of relative stability at around $105 per barrel, oil prices have declined sharply since June 2014. This paper presents a comprehensive analysis of the sources of the recent decline in prices, and examines its macroeconomic, financial and policy implications. The recent drop in prices is a significant, but not an unprecedented event as it has some significant parallels with the price collapse in 1985-86. The recent decline has been driven by a number of factors: several years of upward surprises in the production of unconventional oil; weakening global demand; a significant shift in OPEC policy; unwinding of some geopolitical risks; and an appreciation of the U.S. dollar. Although the relative importance of each factor is difficult to pin down, OPEC's renouncement of price support and rapid expansion of oil supply from unconventional sources appear to have played a crucial role since mid-2014. The oil price drop will lead to substantial income shifts from oil exporters to oil importers resulting in a net positive effect for global activity over the medium term. Although several factors could counteract its impact on global growth and inflation, the drop in oil prices will pose significant challenges for monetary, fiscal, and structural policies. JEL Classification Numbers: Q40, Q41, Q43, F40, E32, E62. Terms of use: Documents in

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Section: Discussionmentioning

confidence: 99%

Section: A Developments In Supply and Demandmentioning

confidence: 99%

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

Baffes¹,

et al. 2015

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“…The long-run price elasticity of oil demand in both production and consumption is assumed to equal 0.08, while the short-run elasticity, which reflects the interaction of the long-run elasticity [1] and also with the Bayesian estimation results in Benes et al [39]. In the baseline, the contribution of oil to output is equal to the oil cost share.…”

Section: (G) Calibrationmentioning

confidence: 99%

Oil and the world economy: some possible futures

Kumhof

Muir

2014

Phil. Trans. R. Soc. A.

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This paper, using a six-region dynamic stochastic general equilibrium model of the world economy, assesses the output and current account implications of permanent oil supply shocks hitting the world economy. For modest-sized shocks and conventional production technologies, the effects are modest. But for larger shocks, for elasticities of substitution that decline as oil usage is reduced to a minimum, and for production functions in which oil acts as a critical enabler of technologies, output growth could drop significantly. Also, oil prices could become so high that smooth adjustment, as assumed in the model, may become very difficult.

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“…Owen et al (2010) review the status of conventional oil reserves and suggest that commercially exploited oil is limited and will decline. This is also the conclusion in Benes et al (2012) whom address the limits to geology as easy and conventional oil reserves are reduced, and the possibilities of technological developments to reduce cost from unconventional and complex oil reserves. Oil supply involves all countries globally and energy security is discussed in several papers (Helm, 2002;Yergin, 2006;Stirling, 2010, Yang et al, 2014.…”

Section: Introductionmentioning

confidence: 81%

Pro-Cyclical Petroleum Investments and Cost Overruns in Norway

et al. 2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Development projects in the oil industry often have cost overruns. Through analysis of data from Norwegian development projects in the petroleum industry, this paper investigates the common effect of business cycle developments on cost overruns. Lack of capacity and expertise in a tight supplier market yield cost inflation and difficulties in managing projects. Unlike previous analyses of cost overruns, we analyse projects over a long time period to capture the cyclical effects. We document a statistically significant positive relationship between oil price developments and cost overruns, with shocks or surprises to the oil price during the project implementation having a larger impact on cost overruns than the oil price level itself. Cost overrun ultimately leads to reduced competitiveness for the industry, and we discuss consequences and policy implications for business and society of these cost overruns. Terms of use: Documents inJEL-Codes: D220, D240, G310.Keywords: cost overruns, petroleum projects, business cycle, oil price. Thanks are due to a number of specialists in petroleum-related government agencies, the oil industry and the supplies sector for useful suggestions and comments. Thanks to the Research Council of Norway (Petrosam 2) for funding. Roy Endré Dahl2

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The future of oil: Geology versus technology

Cited by 64 publications

References 18 publications

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses

Oil and the world economy: some possible futures

Pro-Cyclical Petroleum Investments and Cost Overruns in Norway

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