"Peak oil" refers to the future decline in world production of crude oil and to the accompanying potentially calamitous effects. The majority of the literature on peak oil is non-economic and ignores price effects even when analyzing policies. Unfortunately, most economic models of depletable resources do not generate production peaks. I present four models which generate production peaks in equilibrium. Production increases in the models are driven by: demand increases, cost reductions through advancing technology, cost reductions through reserve additions, and production capacity increases through site development. Production decreases are driven by scarcity. The models do ...
<0 and C"><0, [S.sub.t+1] - [S.sub.t] = f(w,[S.sub.t]) and [S.sub.1] = 0. Changes in reserves are then [R.sub.t+1] - [R.sub.t] = f([w.sub.t],[S.sub.t]) - [q.sub.t] where [R.sub.1] = 0. Let the cost of effort be c(w), where c'><0, [C.sub.KK]><0. Thus, pumping costs and marginal pumping costs are increasing in output but decreasing in capacity. (20) The remaining cost assumption, [C.sub.KK]><- [C.sub.K]([q.sub.i(t-1)], [K.sup.*.sub.i]) for [q.sub.i(t-1)]>