| Description |
1 online resource (31 pages). |
| Physical Medium |
polychrome |
| Description |
text file |
| Series |
IMF working paper ; WP/12/294
|
|
IMF working paper ; WP/12/294.
|
| Note |
Title from PDF title page (IMF Web site, viewed Dec. 18, 2012). |
| Summary |
We study the optimal oil extraction strategy and the value of an oil field using a multiple real option approach. The numerical method is flexible 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 show that decisions are very sensitive to expectations on the equilibrium oil price using a mean reverting model of the oil price where the equilibrium price is also a random variable. Oil production was cut during the 2008-2009 crisis, and we find that the cut in production was larger for OPEC, for countries facing a lower discount rate, as predicted by the model, and for countries whose governments' finances are less dependent on oil revenues. However, the net present value of a country's oil reserves would be increased significantly (by 100 percent, in the most extreme case) if production was cut completely when prices fall below the country's threshold price. If several producers were to adopt such strategies, world oil prices would be higher but more stable. |
| Bibliography |
Includes bibliographical references. |
| Note |
"Research Department." |
|
"December 2012." |
| Local Note |
eBooks on EBSCOhost EBSCO eBook Subscription Academic Collection - North America |
| Subject |
Petroleum -- Prospecting -- Economic aspects.
|
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Petroleum -- Prospecting -- Economic aspects. |
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Petroleum -- Prospecting. |
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Petroleum products -- Prices -- Econometric models.
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Petroleum products -- Prices -- Econometric models. |
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Petroleum products -- Prices. |
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Petroleum reserves -- Econometric models.
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Petroleum reserves. |
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Econometric models. |
| Genre/Form |
Electronic books.
|
| Added Author |
Espinoza, Raphael A.
|
|
Gyurkó, Lajos.
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International Monetary Fund. Research Department.
|
| ISBN |
9781616359744 (electronic book) |
|
1616359749 (electronic book) |
|
9781475568479 |
|
1475568479 |
|
