Authors
1 Assistant Professor, University of Allameh Tabatabaie
2 Environmental Economist, MA
3 Environmental Economist
Abstract
The increased growth of oil consumption, particularly in developing countries, has turned oil into a strategic commodity in the world. Therefore, identifying factors affecting supply and demand in oil market and the study of price changes are of a great importance. In this article, we have reconsidered the Hotelling model for optimal extraction of non-renewal recourses with regard to the resource effects and technological advances. The cost and demand functions for non-renewable resources are set up in a way to find a stable growth in a system of simultaneous equations of supply and demand. We have utilized data from OPEC in the period 1980- 2006 to test the model and the functions of supply and demand in a system of simultaneous equations using a 3SLS method. The estimation results indicate that the growth rate of the oil price has remained unchangned over rather a long period of time, which is consistent with the theoretical outcomes predicted by the model.
Keywords
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