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Considering Extraction Constraints in Long-Term
Oil Supply Modelling T. Rehrl, R. Friedrich, A.
Voss IER University of Stuttgart, Germany
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Supply cost curve of global oil resources
constraints costs ?
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Supply cost curve schematically
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Specific extraction costs of a single oil field
schematically
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Oil supply costs...

• ... are highly dynamic, depending on rates of
  supply.
• Cost estimates are only valid within a certain
  extraction scenario.
• Supply costs and related dynamics do matter!
• Estimating and modelling dynamic cost functions
  is a (too?) difficult task.

How to model extraction constraints then?
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Constraints in oil supply
If production is not intentionally held back,
production follows discovery with a time lag.
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Logistic growth of Cumulative Discoveries (CD)
Discoveries self-regulate discoveries
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Hubbert curve Discoveries and Production in the
US lower 48
from J. Laherrère, 2003
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from ASPO
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from J. Laherrère, 2001
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The Long term Oil Price and EXtraction model
LOPEX Long-term 10-years model periods
(1976-1985,...,2096-2105) Non-OPEC
Cost-price-dependent Hubbert simulation.
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OPEC Intertemporal profit optimisation as
an unconstrained cartel faced with a competitive
fringe (non-OPEC) and a price-elastic demand.
The Long term Oil Price and EXtraction model
LOPEX Long-term 10-years model periods
(1976-1985,...,2096-2105) Non-OPEC
Cost-price-dependent Hubbert simulation.
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LOPEX oil prices with different resource
assumptions
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LOPEX oil price with different time preference
rates of OPEC
IR scenario
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LOPEX oil price at different price elasticities
of demand
IR scenario
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LOPEX optimal OPEC market share
CE constant price elasticity -0.458 IE
increasing price elasticity -0.5 in 2020 -0.6
in 2030 and later
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• Conclusions from LOPEX
• There is no economic incentive for OPEC to
  increase its market share in the future
  significantly above 50 , unless demand becomes
  substantially more price-elastic.
• OPEC has acted almost optimal since 1976 in a 10
  years average.
• OPECs cartel rent will continue increasing.
• OPECs intertemporal choice is mainly determined
  by the current market situations only.
• In any LOPEX scenario, significant higher oil
  prices compared to the reference scenario are
  expected beyond 2010.
• Oil prices depend most notably on the resource
  base assumptions and on the assumed market
  penetration dynamics of unconventional oil.

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Thanks for your interest! Please click for
additional slides
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LOPEX oil price at different technical progress
rates
IR scenario
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Remaining oil resources 4 scenarios
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Remaining oil resources grouped in cost categories