Uncertainty and the price for crude oil reserves

Innovations in futures, options, and derivative instruments permit active trading, speculating and hedging - linking markets for physical petroleum products with financial markets. These derivative markets continuously value petroleum delivered today and for future dates, providing a market price for inventories. Underground petroleum reserves are also an inventory defined by exploration surveys and development drilling. Thus, observable market information can be used to value these reserves. Option - valuation models can be used to price reserves using observable markets, but are dependent on unexplained convenience yields revealed by the term structure of futures prices. The authors apply a general inventory pricing model to petroleum inventories and generate an empirical model of the returns to storage for petroleum markets. They examine the determinants of the crude oil convenience yield using a stochastic control model. They specify optimal production and inventory conditions using a third-order cost function and estimate them using monthly observations. Their inventory arbitrage condition embodies the Hotelling principle and Kaldor's convenience yield, and includes a premium on the dispersion in crude oil prices. The empirical results suggest that returns to storage contain both a cost-reducing component and often sizable premiums associated with the dispersion of petroleum prices. Their findings suggest that crude oil markets differentiated by quality and location provide similar premiums. The premiums associated with the dispersion of petroleum prices may account for persistent backwardation in crude oil prices. This finding may also explain the wide discrepancies between Hotelling values and transaction prices found in previous studies.Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,Labor Policies,Payment Systems&Infrastructure,Oil Refining&Gas Industry,Environmental Economics&Policies,Access to Markets,Markets and Market Access,Economic Theory&Research

The environment as a factor of production

The authors develop a model of environmental resource use in production with an empirical analysis of how electric power companies consume and bank sulfur dioxide pollution permits. The model considers emissions, fuels, and labor as variable inputs with quasi-fixed inputs of permits and capital. Incorporating information from permit markets allows the authors to distinguish between user costs and asset shadow values. Their findings indicate that firms are holding stocks of pollution permits for reasons other than short-term cost savings. The results also reveal substantial substitution possibilities between emissions, permits stocks, and other factors of production. The authors speculate that anticipated secondary markets for carbon-offset inventories related to the flexibility mechanisms of the Kyoto Protocol will have similar effects for greenhouse-gas emitting firms.Markets and Market Access,Economic Theory&Research,Payment Systems&Infrastructure,Environmental Economics&Policies,Montreal Protocol,Environmental Economics&Policies,Economic Theory&Research,Energy and Environment,Carbon Policy and Trading,Montreal Protocol

Substitution and technological change under carbon cap and trade : lessons from Europe

The use of carbon-intense fuels by the power sector contributes significantly to the greenhouse gas emissions of most countries. For this reason, the sector is often key to initial efforts to regulate emissions. But how long does it take before new regulatory incentives result in a switch to less carbon intense fuels? This study examines fuel switching in electricity production following the introduction of the European Union’s Emissions Trading System, a cap-and-trade regulatory framework for greenhouse gas emissions. The empirical analysis examines the demand for carbon permits, carbon based fuels, and carbon-free energy for 12 European countries using monthly data on fuel use, prices, and electricity generation. A short-run restricted cost function is estimated in which carbon permits, high-carbon fuels, and low-carbon fuels are variable inputs, conditional on quasi-fixed carbon-free energy production from nuclear, hydro, and renewable energy capacity. The results indicate that prices for permits and fuels affect the composition of inputs in a statistically significant way. Even so, the analysis suggests that the industry’s fuel-switching capabilities are limited in the short run as is the scope for introducing new technologies. This is because of the dominant role that past irreversible investments play in determining power-generating capacity. Moreover, the results suggest that, because the capacity for fuel substitution is limited, the impact of carbon emission limits on electricity prices can be significant if fuel prices increase together with carbon permit prices. The estimates suggest that for every 10 percent rise in carbon and fuel prices, the marginal cost of electric power generation increases by 8 percent in the short run. The European experience points to the importance of starting early down a low-carbon path and of policies that introduce flexibility in how emission reductions are achieved.Energy Production and Transportation,Energy and Environment,Environment and Energy Efficiency,Carbon Policy and Trading,Markets and Market Access

SLIDES: The Costs and Benefits of Best Management Practices: Insights from the Marcellus Shale

Presenter: Timothy J. Considine, School of Energy Resources, Department of Economics and Finance, University of Wyoming 15 slide

Program representation size in an intermediate language with intersection and union types

The CIL compiler for core Standard ML compiles whole programs using a novel typed intermediate language (TIL) with intersection and union types and flow labels on both terms and types. The CIL term representation duplicates portions of the program where intersection types are introduced and union types are eliminated. This duplication makes it easier to represent type information and to introduce customized data representations. However, duplication incurs compile-time space costs that are potentially much greater than are incurred in TILs employing type-level abstraction or quantification. In this paper, we present empirical data on the compile-time space costs of using CIL as an intermediate language. The data shows that these costs can be made tractable by using sufficiently fine-grained flow analyses together with standard hash-consing techniques. The data also suggests that non-duplicating formulations of intersection (and union) types would not achieve significantly better space complexity.National Science Foundation (CCR-9417382, CISE/CCR ESS 9806747); Sun grant (EDUD-7826-990410-US); Faculty Fellowship of the Carroll School of Management, Boston College; U.K. Engineering and Physical Sciences Research Council (GR/L 36963, GR/L 15685

The interaction of gibberellic acid and 2-(chloroethyl) trimethyl ammonium chloride on fruit cluster development in Vitis vinifera L.

The effects of applications of GA and CCC in factorial combinations and at different stages of development were measured on reproductive development of five cultivars of Vitis vinifera: Doradillo and Muscat (seeded), Sultana (stenospermocarpic), and Cape Currant and Zante Currant (parthenocarpic). The effect of GA on fruit set varied with concentration, stage of development when applied, and the cultivar, that is whether seeded, stenospermocarpic, or parthenocarpic. Set was decreased in the parthenocarpic cultivars by GA applied before anthesis; other timings were without effect. On Sultana, set was decreased by GA applied at anthesis but was increased by earlier or later applications. With the seeded cultivars, GA reduced the number of seeded berries but increased the number of seedless berries, the net effect being usually an increase. The application of CCC two weeks. before anthesis generally increased set. The amount of seed development also influenced the effect of GA on berry fresh weight; seeded berries were unaffected but seedless berries were usually enlarged. The enlargement was greatest in parthenocarpic berries especially when treated at anthesis. On stenospermocarpic berries, treatment two weeks after anthesis had the greatest effect. CCC reduced berry size whether applied before or after anthesis; the reductions ranged from 2 to 20 per cent.GA increased the length/width ratio of berries, particularly when applied at anthesis, but the amount of change depended on the cultivar. CCC reduced the length/width ratio of Sultana berries. The effects of GA and CCC on rachis elongation were also opposite: GA increased the length of the rachis and pedicel, particularly if applied before anthesis; CCC reduced their length.There were few instances where GA and CCC interacted significantly; their effects within the concentration ranges chosen were generally additive.Der Einfluß von Gibberellinsäure und CCC auf die Traubenentwicklung bei Vitis vinifera L.Der Einfluß von Gibberellinsäure (GS)- und CCC-Gaben in faktorieller Kombination und in verschiedenen Entwicklungsphasen auf die generative Entwicklung der fünf Vitis vinifera-Sorten Doradillo und Muskat (samenhaltig), Sultana (stenospermokarp), Cape Currant und Zante Currant (parthenokarp) wurde gemessen. Der Einfluß der GS auf den Fruchtansatz hing von der Konzentration, dem Entwicklungsstadium zur Zeit der Applikation und von der Sorte ab, d. h. ob samenhaltig, stenospermokarp oder parthenokarp. Vor der Anthesis angewendet, verminderte GS den Fruchtansatz; spätere Anwendungen waren ohne Wirkung. Bei Sultana verminderte GS den Fruchtansatz, wenn sie zur Blütezeit, und erhöhte ihn, wenn sie vorher oder nachher appliziert wurde. Bei den samenhaltigen Sorten verminderte GS die Zahl der samenhaltigen und erhöhte die der samenlosen Beeren; die Gesamtzahl der Beeren war gewöhnlich vergrößert. Die Anwendung von CCC zwei Wochen vor dem Blühen erhöhte allgemein den Fruchtansatz.Über die Samenentwicklung beeinflußte GS auch das Frischgewicht der Beeren; samenhaltige Beeren ließen keine Wirkung erkennen, während samenlose meistens vergrößert waren, und zwar am stärksten bei parthenokarpen Beeren, besonders nach Behandlung während der Anthesis. Bei stenospermokarpen Beeren hatte die zwei Wochen nach der Blütezeit applizierte GS die größte Wirkung. CCC, vor oder nach dem Aufblühen angewendet, verminderte die Beerengröße; der Rückgang betrug 2-20%. Durch GS wurde - sortenabhängig - das Verhältnis Länge/Breite der Beeren vergrößert, besonders bei Anwendung während der Anthesis. CCC verminderte dieses Verhältnis bei Sultana-Beeren. Auch das Wachstum des Traubenstieles wurde durch GS und CCC gegensätzlich beeinflußt; GS förderte das Längenwachstum von Traubenund Beerenstielen, besonders bei Anwendung vor der Blüte; CCC verminderte es. In einigen Fällen beeinflußten sich GS und CCC gegenseitig signifikant; im allgemeinen wurden hierdurch bei den verwendeten Konzentrationen ihre Wirkungen gesteigert

Gibberellic acid, chlorocholine chloride and yield increases in Zante currant

GA and CCC additively increased yield of Zante currant fruit. GA induced an increase in berry size (weight and volume) which was unaffected by CCC, while CCC offset to an appreciable extent the reduction in berry number associated with low concentrations of GA