ABSTRACT
Economists have long been concerned with problems associated with petroleum production. However, efforts to develop an analytical framework for the study of such problems have been impeded by the morass of technological and socioeconomic problems peculiar to this decision environment. Analytical models suggested in earlier works do not consider certain processes which are basic to the technology of petroleum production. For example, Paul Davidson, James McKie and Stephen McDonald, and Vernon Smith, fail to provide an analytical model for petroleum production which includes interaction among (a) current production rates, (b) the role of investment (both in terms of pressure maintenance, and present and/or future use of artificial lifting methods), and perhaps most important, (c) the possible dependence of recoverable stocks on the time-path of production. Further, earlier works, with the exception of those by Smith and Kuller, rely on linear production paths, and only the latter attempts to develop explicitly both the economic and physical nature of the user costs involved in petroleum production.
