On the theory of crude oil prices—III. Implications of incorporating opportunity costs

Abstract

If recent trends are continued, the price of crude oil will be a strong driving force in changing the practice of energy conversion. The first paper in this series discussed the inclusion of an opportunity cost to a state or nation in the price of crude oil. The second paper discussed the price elasticity of crude oil reserves and concluded that a market-induced increase in price, unrelated to rising traditional costs, leads to increased proved reserves in a range governed by natural and geological constraints. This paper discusses some implications of incorporating opportunity costs into the price of crude oil.