Physical and Economic Models of Natural Resource Scarcity: Theory and Application to Petroleum Development and Production in the Lower 48 United States, 1955-1985
Cleveland, Cutler John, Jr.
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https://hdl.handle.net/2142/70656
Description
Title
Physical and Economic Models of Natural Resource Scarcity: Theory and Application to Petroleum Development and Production in the Lower 48 United States, 1955-1985
Author(s)
Cleveland, Cutler John, Jr.
Issue Date
1988
Doctoral Committee Chair(s)
Hannon, Bruce
Department of Study
Geography
Discipline
Geography
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Geography
Economics, General
Environmental Sciences
Abstract
Physical and economic models of the costs of developing and producing petroleum in the lower 48 United States were calculated and compared for the 1955 to 1985 period. The physical scarcity model calculated the energy return on investment (EROI) for petroleum development and production. The EROI is the ratio of the petroleum energy added to reserves or produced to the energy used in the development and production process. The economic scarcity model calculated the average cost of developing and producing petroleum. Statistical trend analysis was applied to the EROI and average cost time series. Both models indicated increasing scarcity at the development stage was evident by the mid-1960's. The EROI for production increased showed decreasing scarcity through the early part of the period, followed by increasing scarcity in the 1970's. Average production costs showed no trend through the early 1970's, after which they exhibited increasing scarcity. The oil price shocks had a significant cost-increasing impact.
A cost-effort scarcity model was also applied to the average cost and EROI time series data. Both indices were found to be significantly related to the rate of development and production effort and to cumulative resource depletion. The cost-effort model for development showed increasing scarcity, while the production data showed no trend or decreasing scarcity. A model of optimal depletion was also applied to the average cost time series data for oil production. The results were consistent with the theory of optimal depletion, but were shown to be sensitive to assumptions about the discount rate and the elasticity of demand for crude oil.
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