Abstract
ABSTRACT The economics of exhaustible resources was employed in this paper to isolate the relationships between reserves estimates, time, and optimal pricing. A multilinear regressive technique was utilized to evaluate the statistical significance of the relationship of the independent variables of uncertainty in reserves estimates and time to the dependent variable of price. An idealized model of the international petroleum market was used as the basis of analysis and to develop theoretical statements regarding the affect of uncertainty in reserves estimates on petroleum pricing. It was found that for reserves estimates made with uncertainty there was a statistical significance in its effect on pricing through time while reserves estimates made with certainty only time had a significant effect on pricing. Therefore, static commodity-based equilibrium methods of economic analysis are not adequate for the forecasting of future petroleum prices. Instead, price forecasting models must be dynamic and must incorporate reserves estimates that have been calculated with the most precise reservoir engineering and geological methodologies.
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