Political constraints on government cartelization: the case of oil production regulation in Texas and Saudi Arabia.

We examine government cartelization efforts in crude oil production. Texas and Saudi Arabia are alleged to act as swing producers to maintain the interstate (1933-1972) and OPEC (1973 on) oil cartels respectively. We analyze the political constraints that affected the ability of Texas and Saudi Arabia to act as residual producers within their respective cartels. In the case of Texas, political factors molded individual firm production quotas, advantaging high-cost producers and hence, reducing total cartel net profits. Further, Texas had limited range for adjusting total state production to maintain interstate output at levels consistent with target prices. Saudi Arabia’s role as swing producer within OPEC raises similar questions regarding how cartel output is shared among members, and the extent to which domestic economic and political pressures coming from various member countries may undermine the effectiveness of the cartel. OPEC ‘s coordination problem has been more difficult than that faced by the interstate cartel for a variety of reasons that we explore. Even so, they have not kept the OPEC members in general, and Saudi Arabia in particular, from exerting a strong influence on the level of world oil prices.

The economic evolution of petroleum property rights in the United States.

We examine Harold Demsetz's (1967) prediction that property rights emerge and are refined as the benefits of doing so exceed the costs in the context of oil and gas resources in the U.S. Familiar influences on the development of petroleum property rights, technology, market demand, and politics, provide support for the hypothesis, and those issues are examined. Our primary contribution is to demonstrate the important role of a less familiar factor, the presence in the reservoir of both oil and gas with differentially volatile prices. This factor has affected the nature of the property rights assigned with unitization, an institutional arrangement to internalize the common pool externality. Information asymmetries and conflicting price expectations have resulted in unit agreements that would not have been predicted in a strict neo-classical sense. Our analysis provides new insights regarding the nature of voluntary unitization contracts, inherent limits to producers' ability to internalize externalities, and the welfare implications of compulsory unitization.

The Self-Enforcing Provisions of Oil and Gas Unit Operating Agreements: Theory and Evidence

This paper extends the existing theory and empirical investigation of unitization contracts. It highlights the importance of incentive-compatibility and self-enforcement and the bargaining problems faced in achieving viable, long-term contracts. We argue that only if the parties to a unitization contract have unit production shares that are the same as their cost shares will the contract be incentive compatible. Using a data base of sixty unit operating agreements, we measure the industry's actual behavior against the principles of production from a common pool. Our survey of units that have only one production phase and that are relatively homogeneous reveals that such equal sharing rules are always found and they appear to encourage the parties to behave optimally. In more complex units with multiple production phases and/or separate concentrations of oil and gas (gas caps) we find deviations from the theoretical ideal. In the case of multi-phase units, we find equal cost and production shares within phases, but not across phases. A pre-set trigger for shifting from one production phase to the next helps to maintain optimal behavior. For gas cap units, however, we generally do not find the equal sharing rule. Conflicts and rent dissipation follow as illustrated by the case of the Prudhoe Bay Unit. The paper describes the desirable contract rules for avoiding moral hazard. It also shows how the effects of those rules can be replicated in difficult situations.

Intermittent Synchronization in a Pair of Coupled Chaotic Pendula

Numerical simulations have been carried out for a pair of unidirectionally coupled identical pendula under the action of a common external ac torque. Both the master pendulum and the slave pendulum were in chaotic states. The only form of persistent locking appeared to be a computational artifact; otherwise the synchronization of slave to master was found to be intermittent

Intermittent Synchronization of Resistively Coupled Chaotic Josephson Junctions

Numerical simulations have been used to investigate the dynamics of a pair of resistively linked Josephson junctions with ac bias. For suitable choices of parameters, the chaotic states of the two junctions become intermittently synchronized. Intervals of synchronization are interleaved between bursts of desynchronized activity. The distributions of these laminar times and their dependence on the coupling strength are determined. The role of phase winding in the definition of synchronization intervals is considered

Unconventional strong pinning in the low temperature phase of U_.9725Th_.0275Be_13

We investigated low field vortex dynamics in a single crystal of U_.9725Th_.0275Be_13. We found a sharp transition in the vortex creep rate at the lower transition temperature T_c2, coincident with the second jump in the specific heat. In the high-temperature phase, rather strong creep rates are observed. In the low temperature phase, the rates drop to undetectabely low levels. This behaviour indicates that a very strong pinning mechanism is present in the low temperature phase of U_.9725Th_.0275Be_13, which could be explained by the existence of domain walls, separating discreetly degenerate states of a superconductor, that can sustain fractional vortices and thus act as very strong pinning centers.Comment: 2 pages, 2 figures, accepted in PhysicaB, LT2

Vacuum chamber translation/positioning mechanism and welding power supply controller

Welding in the vacuum of space represents an important and fundamental problem for space exploration. Repairs or connection of metal components on orbit or during travel to the moon or distant planets may be required. Cracks or holes in spacecraft skin or supporting structures external to the pressurized section will require some type of repair that must be permanently made to the skin or support by welding. The development of a translation/positioning system that will permit research into welding of metal samples in a small vacuum chamber located at Marshall Space Flight Center (MSFC) is addressed. The system and associated software was tested to the extent possible without the availability of the welder power supply or control computer that must be supplied by MSFC. Software has been developed for straight line welding. More extensive and varied translations are possible with simple alterations to the operating software to use the full capabilities of this three axes system. The source code 'VW.BAS' has been provided to serve as an example for further development of the vacuum welder translation system

Distinguishable patterns of competition, collusion, and parallel action

Alternative market structures are distinguishable by the degree of parallel action exhibited by producers. We show that the correlation between output levels varies systematically with the degree of interdependence among firms, and establish an ordering among alternative behavioral hypotheses (Cournot, Stackelberg, Edgeworth/Bertrand, collusion, and perfect competition). Because the ordering is invariant to the values of background parameters, statistical tests of market conduct may be possible even when the slopes of the demand curve and marginal cost curves are unknown. An application to the world oil market finds strong evidence of collusive behavior among OPEC members, but not elsewhere

On The Portents of Peak Oil (And Other Indicators of Resource Scarcity)

Although economists have studied various indicators of resource scarcity (e.g., unit cost, resource rent, and market price), the phenomenon of “peaking” has largely been ignored due to its connection to non-economic theories of resource exhaustion (the Hubbert Curve). I take a somewhat different view, one that interprets peaking as a reflection of fundamental economic determinants of an intertemporal equilibrium. From that perspective, it is reasonable to ask whether the occurrence and timing of the peak reveals anything useful regarding the state of resource exhaustion. Accordingly, I examine peaking as an indicator of resource scarcity and compare its performance to the traditional economic indicators. I find the phenomenon of peaking to be an ambiguous indicator, at best. If someone announced that the peak would arrive earlier than expected, and you believed them, you would not know whether the news was good or bad. Unfortunately, the traditional economic indicators fare no better. Their movements are driven partially by long-term trends unrelated to changes in scarcity, and partially but inconsistently driven by actual changes in scarcity. Thus, the traditional indicators provide a signal that is garbled and unreliable.- Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research