December 5, 2010

How Does Economic Theory Explain the Hubbert Peak Oil Model?

by Frederic Reynes, Marjan W. Hofkes and Samuel Jovan Okullo

- This article compares the advantages and limits of the two main methods used in the literature to model oil production: the technical Hubbert approach and the economic Hotelling approach. We argue that the technical approach can be nested in the economic approach by showing that a technical or geological constraint can be reinterpreted as a cost constraint. This provides an economic foundation for Hubbert’s peak oil model.

Reynes, F., M.W. Hofkes and S.J. Okullo (2010). "How Does Economic Theory Explain the Hubbert Peak Oil Model?" USAEE Working Paper No. 10-052, available at SSRN. Nov 2010.