Counterfactual analysis of compulsory unitization as a solution to the common pool externality in the oil and gas industry

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dc.contributor.advisorMiravete, E. J. (Eugenio J.)
dc.contributor.committeeMemberRyan, Stephen
dc.contributor.committeeMemberTown, Robert
dc.contributor.committeeMemberXu, Haiqing
dc.creatorHerrera, Carlos, Ph. D.
dc.date.accessioned2017-06-08T19:14:23Z
dc.date.available2017-06-08T19:14:23Z
dc.date.issued2017-05
dc.date.submittedMay 2017
dc.date.updated2017-06-08T19:14:23Z
dc.description.abstractThe exploitation of a single oil field by several firms is a typical example of the common pool externality (CPE). As a possible solution to it, regulators have innovated policies that allow such firms to coordinate by selecting a single operator to exploit the whole field. Moreover, every state, but Texas, can even force firms to join a coalition. In this dissertation I analyze the dynamic strategic interaction of firms competing for common resources. By modeling such dynamic interactions, I will be able to counterfactually assess what would happen under different regulatory scenarios. I use the model, along with other techniques, to quantify the loss in production and profits due to the common pool externality; then I explore how implementing different policies that promote or enforce coalition formation would change productivity and welfare. This research is has three main parts. In Chapter 2, I explore the most important institutional details, and simulate how the characteristics of a reservoir, the composition of the hydrocarbons, and the distribution of firms in a field affect the outcome of coordination. In Chapter 3, I use different reduced form techniques to estimate how implementing compulsory unitization in New Mexico has improved welfare. In Chapter 4, I develop a random stopping model and estimate the parameters using the methodology developed by Bajari and Levin, 2007. Once the parameters of the model are estimated, I will be able to explore my different research questions. The results suggest that relaxing the restrictions in voluntary unitization would increase welfare at a lesser scale than implementing compulsory unitization. Nevertheless, none of these policies will nullify the entire negative effect caused by the common pool externality.
dc.description.departmentEconomics
dc.format.mimetypeapplication/pdf
dc.identifierdoi:10.15781/T28K7529C
dc.identifier.urihttp://hdl.handle.net/2152/47156
dc.language.isoen
dc.subjectIndustrial organization
dc.subjectUnitization
dc.subjectCommon pool externality
dc.subjectCPE
dc.subjectBargaining
dc.subjectDynamic models
dc.subjectOil field exploitation
dc.subjectOil and gas industry
dc.subjectOil field regulatory scenarios
dc.subjectOil field coalitions
dc.subjectOil field productivity
dc.subjectCompulsory unitization
dc.subjectVoluntary unitization
dc.titleCounterfactual analysis of compulsory unitization as a solution to the common pool externality in the oil and gas industry
dc.typeThesis
dc.type.materialtext
thesis.degree.departmentEconomics
thesis.degree.disciplineEconomics
thesis.degree.grantorThe University of Texas at Austin
thesis.degree.levelDoctoral
thesis.degree.nameDoctor of Philosophy

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