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Category Archives: Q3

The Effect of Federal Regulations on the Outcomes of Auctions for Oil and Gas Leaseholds

By Artur Shikhaleev

This thesis attempts to analyze the impact of the differences in regulatory frameworks that govern state-owned and federally-owned lands on the outcomes of auctions for oil and natural gas leaseholds in the state of New Mexico. The analysis tries to isolate the effect of ownership by controlling for auction structure, leasehold characteristics, and prices of underlying resources. Given past research, the hypothesis is that stricter regulations carry a heavier cost to buyers, so the expectation is that federally-owned leaseholds, which are more regulated, are traded at a discount to state-owned leaseholds. However, the result of this thesis is contradictory to the hypothesis. The conclusion is that stricter regulations do not lead to a discounted auction price for an oil and gas leasehold.

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Advisor: James Roberts, Kent Kimbrough | JEL Codes: C12, C21, Q35, Q58 | Tagged: Auction, Education, environment, federal, natural gas, Oil, Regulation, State

Unitization of Oil Reserves in Alaska and the Supply Elasticity of a Common Pool Resource

By Emily Bailey

Unitization, a common but not omnipresent policy that is lauded in both the economics and environmental world for its efficiency, attempts to solve the “tragedy of the commons” common pool failure of oil production by creating a system in which all those with interests in one reserve produce jointly and split profits accordingly. This paper empirically demonstrates what other researchers have hypothesized – that unitization reduces the elasticity of supply with respect to price. It then extrapolates to potential impacts this policy could have on the environment at large by forecasting a future production path based on the model from the previous section. Finally, it demonstrates how unitization could slow the accumulation of greenhouse gases in the atmosphere.

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Advisor: Christopher Timmins | JEL Codes: Q38, Q48, Q54 | Tagged: Alaska, Climate Change, Oil, Oil Production, Oil Reserves, Unitization

Identifying Supply and Demand Elasticities of Iron Ore

By Zhirui zhu

This paper utilizes instrumental variables and joint estimation to construct efficiently identified estimates of supply and demand equations for the world iron ore market under the assumption of perfect competition. With annual data spanning 1960-2010, I found an upward sloping supply curve and a downward sloping demand curve. Both of the supply and demand curves are efficiently identified using a 3SLS model. The instruments chosen are strong and credible. Point estimation of the long-run price elasticities of supply and demand are 0.45 and -0.24 respectively, indicating inelastic supply and demand market dynamics. Back-tests and forecasts were done with Monte Carlo simulations. The results indicate that 1) the predicted prices are consistent with the historical prices, 2) world GDP growth rate is the determining factor in the forecasting of iron ore prices.

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Advisor: Gale Boyd | JEL Codes: C30, Q31 | Tagged: Demand, Iron Ore, Supply, Simulation, Simultaneous Equation

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