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Hotelling's Rule and Oil Prices: An Empirical Study
Luleå University of Technology, Department of Business Administration, Technology and Social Sciences.
2016 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesisAlternative title
Hotelling's regel och oljepris : En empirisk studie (Swedish)
Abstract [en]

The general objective has been to empirically analyze how Hotelling’s rule has predicted the crude oil price development over the last 100 years and if the rule can work as a framework to predict future resource prices. Hotelling’s rule has been perceived as both outdated and relevant, during the last decades. A general conclusion from previous research is that resource price-developments are more complex than Hotelling assumed. The analysis has been conducted through tests of variables like interest rates, time spans and extraction costs. The assumption of exponentially increasing resource prices has also been tested. The results obtained show no general support for the Hotelling-rule’s ability to predict future prices. Our results suggest that Hotelling’s rule predicts price paths best when a short time-span is considered. The lack of predictability is due to high volatility in resource prices, something Hotelling’s rule does not account for.

Abstract [sv]

Det övergripande syftet med denna studie har varit att empiriskt analysera hur väl Hotellings-regel har förutspått utvecklingen av oljepriset under de senaste hundra åren och om regeln fungerar som ett bra ramverk för att kunna förutspå framtida resurspriser. Hotellings-regel har uppfattats som både föråldrad samt relevant under de senaste årtiondena. En generell slutsats från tidigare forskning är dock att utvecklingen av icke-förnybara resursers priser är mer komplex än vad Hotelling antog. Analysen har utförts genom tester av olika variabler som räntor, tidsperioder och utvinningskostnader. Antagandet om exponentiellt ökande resurspriser har också testats. De erhållna resultaten ger inget generellt stöd för Hotelling regeln som ett bra ramverk till att förutspå framtida resurspriser. Resultaten tyder dock på att Hotellings-regel förutspår framtida priser bäst när en kortare tidsperiod antas. Modellens avsaknad av förutsägbarhet är sannolikt på grund av volatilitet i resurspriser, något som Hotellings-regel inte tar fullt hänsyn till.

Place, publisher, year, edition, pages
2016. , p. 66
Keyword [en]
Oil, hotelling, economy, economics, history, finance, resources, natural resources, resource prices, oil prices, scarcity, renewable resources, non-renewable resources, olja, hotelling, ekonomi, nationalekonomi, historia, finans, råvaror, råvarupriser, oljepriser, förnybara resurser
National Category
Economics
Identifiers
URN: urn:nbn:se:ltu:diva-61233OAI: oai:DiVA.org:ltu-61233DiVA, id: diva2:1059465
Educational program
Business and Economics, master's level
Supervisors
Examiners
Available from: 2016-12-22 Created: 2016-12-22 Last updated: 2016-12-22Bibliographically approved

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