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Optimal oil production and the world supply of oil

Abstract:

We study the optimal oil extraction strategy and the value of an oil eld using a multiple real option approach. The numerical method is exible enough to solve a model with several state variables, to discuss the effect of risk aversion, and to take into account uncertainty in the size of reserves. Optimal extraction in the baseline model is found to be volatile. If the oil producer is risk averse, production is more stable, but spare capacity is much higher than what is typically observed. We...

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Publication status:
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Publisher:
University of Oxford
Series:
OxCarre Papers
Publication date:
2012-08-07
Paper number:
92
Keywords:
Pubs id:
1143809
Local pid:
pubs:1143809
Deposit date:
2020-12-15

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