Journal of Political Economy
Summary:
- In existing wells, the capacity of the well and underground pressure that pushes oil through the rock, to the wellbore and up to the surface creates a maximum flow rate that smoothly declines over time as the pressure eases. As a result, existing wells do not increase or decrease production in response to prices.
- Oil extractors can drill new wells in response to prices, eventually leading to increased oil production. Drilling new wells takes both money and time, creating a lag of a few months before oil can come on stream.
- Large changes in oil demand have an immediate impact on oil prices and drilling activity, and eventually on production from new wells.
Areas of Focus: Energy Markets, Fossil Fuels, Climate Economics, Fossil Fuels
Definition
Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Definition
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Definition
Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...
Definition
Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...