Nonrenewable Resource Allocation under Intertemporally Dependent Demand

It is often argued informally that demand responses to the major oil price increases of 1973 and 1979 were still not complete several years after the events. The evidence, moreover, is that the long-run price elasticity of demand exceeds the short-run price elasticity, both for energy aggregates and individual energy carriers (see Kouris, 1983, for a survey). One reason is undoubtedly that the possibilities for substituting away from a particular energy resource, or energy in general, in “production” cannot be activated instantaneously, even at prohibitive cost. Existing processes have to be modified, new capital equipment ordered and installed, etc. (see Sweeney, 1983, for an overview of these arguments). The upshot of this is that the demand for energy and energy carriers has a dynamic structure.

By: A. Khadr

Latest Tweets from @OxfordEnergy

  • Jonathan Stern quoted on the future of gas: On CO2 grounds and also methane leakage it will not be possible to repr… https://t.co/wtJ0a7QtK3

    May 18th

  • Jonathan Stern on EU gas market liberalisation: Huge amount achieved in NWE and to lesser extent in Central Europe;… https://t.co/UmieaGKDcA

    May 17th

  • Kallanish Energy reviews an OIES comment on Iran sanctions, Venezuela, the OPEC+ deal, spare capacity, Saudi Arabia… https://t.co/zM6YbcktCw

    May 17th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.