Oil price hikes and development triggers in peace and war
UNSPECIFIED (1996) Oil price hikes and development triggers in peace and war. In: Annual Conference of the Royal-Economic-Society, UNIV KENT, CANTERBURY, ENGLAND, 1995. Published in: ECONOMIC JOURNAL, 106 (435). pp. 445-457.Full text not available from this repository.
The theory of irreversible investment predicts that development of an oil field should take place when a unique 'price trigger' is passed. At the start of the I99o/9I Gulf War, however, oil prices promptly doubled, only to fall back to their previous level when peace returned six months later. To incorporate such large but 'transitory' price hikes, we evaluate the profitability of an oil field contingent on war and peace and calculate separate triggers in each case. For plausible parameter values, we find that the switch between these development triggers is about 3/4 of the price hike caused by the war. The price hike is therefore equivalent to a permanent price increase of only a quarter of its size.
|Item Type:||Conference Item (UNSPECIFIED)|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Journal or Publication Title:||ECONOMIC JOURNAL|
|Publisher:||BLACKWELL PUBL LTD|
|Number of Pages:||13|
|Page Range:||pp. 445-457|
|Title of Event:||Annual Conference of the Royal-Economic-Society|
|Location of Event:||UNIV KENT, CANTERBURY, ENGLAND|
|Date(s) of Event:||1995|
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