Natural Resource Economics Problem -
The goal of this problem is to begin constructing a simple Excel model that answers the basic question: when will we run out of oil? According to the U.S. Department of Energy, proven world oil reserves are estimated at 1,654 billion barrels. Approximately one-half of those reserves are in the Middle East.
Begin by estimating annual oil consumption and world population from the U.S. Department of Energy for the period 2010 to 2100, using base year data AND the projected annual growth rates (last column). Forecasts for oil consumption and population are at the following two sites.
- Oil consumption
- Population
a) Use this basic model to estimate when we will run out of oil. Does this seem realistic to you? Why or why not? For you answer, provide a suitable graphic with description and any comments.
b) Calculate the average annual oil consumption per person on annual (barrels/person/year) and daily (gallons/person/day) basis.
c) Separate world oil consumption into U.S. and rest of world (ROW). Does this change your answer to part a at all? (Important: reserves are global, not local. This question only asks you to consider consumption at local level.) Does this model make more sense than the world one? In thinking about your answer, calculate how much oil the average person in the U.S. consumes per year throughout the model.
d) Conduct the following sensitivity analysis in your model:
i. What if remaining reserves total 2,000 billion barrels? 2,500 billion barrels?
ii. ROW oil consumption grows at 1.4% per year; U.S. oil consumption grows at 1.2% per year.
e) Conduct additional sensitivity analysis (or goal seeking) that might be appropriate. Present your results from the above sensitivity analysis in an organized table and/or graphs. Discuss the implications of your findings. Then discuss whether the model is too simplistic and how you recommend changing it. Propose actual next steps.
Attachment:- Assignment File.rar