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| 1 |
ID:
181771
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| Summary/Abstract |
The choice of a modeling approach is driven by the oil policy or market question that needs to be addressed. We provide the non-modeling community with insightful information on oil market models, shedding light on the economic interpretation of technical aspects (such as the meaning of the costs associated with certain types of constraints), but without introducing any mathematical formulations. We also emphasize the reasonings and assumptions underlying the modeling structures and solutions proposed in the literature. We first review how models have usually represented market fundamentals. We then examine recent modeling developments addressing market issues (such as the impact of the shale oil revolution and the shift in producers’ behavior) and policy questions (such as the use of spare capacity to stabilize prices, the lifting of export controls, and the management of uncertainties surrounding the energy transition) that have emerged since the Great Recession. Moreover, given that climate policies increase the interdependency of all energy markets, we discuss how long-term multi-fuel models produce scenarios for oil as part of the global energy mix. We also suggest ways to tackle questions not yet covered by the oil market modeling literature, such as the dependence of government budgets on oil revenues.
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| 2 |
ID:
098593
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| Publication |
2010.
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| Summary/Abstract |
The persistent uncertainty about mid-century CO2 emissions targets is likely to affect not only the technological choices that energy-producing firms will make in the future but also their current investment decisions. We illustrate this effect on CO2 price and global energy transition within a MERGE-type general-equilibrium model framework, by considering simple stochastic CO2 policy scenarios. In these scenarios, economic agents know that credible long-run CO2 emissions targets will be set in 2020, with two possible outcomes: either a "hard cap" or a "soft cap". Each scenario is characterized by the relative probabilities of both possible caps. We derive consistent stochastic trajectories-with two branches after 2020-for prices and quantities of energy commodities and CO2 emissions permits. The impact of uncertain long-run CO2 emissions targets on prices and technological trajectories is discussed. In addition, a simple marginal approach allows us to analyze the Hotelling rule with risk premia observed for certain scenarios.
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