Date of Award

Spring 5-1978

Document Type

Thesis

Degree Name

Master of Arts (MA)

Department

Economics

Committee Director

Garey C. Durden

Committee Member

James J. Brady

Committee Member

Wayne K. Talley

Call Number for Print

Special Collections LD4331.E26L95

Abstract

The objective of this thesis is to develop a theory for defining optimal conservation and applying definition to the prevailing rate of domestic petroleum production. Optimal conservation is defined as action designed to achieve or to maintain, from the point of view of society as a whole, the maximum present value of natural resources (or of a natural resource). The proper "action" is defined according to the pure theory of exhaustible resources. The literature survey is a chronological series of articles concerning this theory.

Through building a model which shows that optimal conservation occurs when the marginal internal rate of return is equal to the market rate of interest, adjusted for risk and uncertainty, this paper is able to determine whether the prevailing rate of domestic petroleum fits this definition or not. Testing data for newly discovered United States petroleum reserves for years 1959 through 1975 we concluded that the prevailing rate of discoveries is less than optimal conservation amount.

Finally, we propose the reason for this dilemma and propose a policy of unitization to correct the discovered problem.

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DOI

10.25777/8zww-qr07

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