ABSTRACT
This paper by Spann and Erickson focuses on long-run oil and gas supply (exploration) using econometric techniques. The approach may be compared with the technique used by the National Petroleum Council as described in the paper by Avramides. The one approach being via econometrics and the other being essentially based on industry geological, engineering, and cost experience with certain relationships quantified by statistical methods. In making the comparison it is important to note that the stated objectives of the two studies are different. Spann’s work seeks to estimate the response of supply to economic factors, primarily prices and interest rates, and to time. The NPC approach seeks to estimate the additions to reserves and production which Would result from certain trends in physical factors—such as drilling and discoveries—and to calculate the cost of such reserves and production under cost parameters, thus deriving a price to go with the physical levels assumed.
