Three Essays on Oil Scarcity, Global Warming and Energy Prices

In this Ph.D. dissertation, Matthew Riddle presents three essays. In the first essay, he constructs a supply and demand model for crude oil markets. He then fits the model to historical price and quantity data to be able to project future oil prices. Ex-post forecasts using this model predict historical price trends more accurately than most oil forecasting models.

The second essay incorporates the supply and demand model from the previous paper into a complex systems model that also includes oil futures markets. Adaptive-agent investors in futures markets choose from a set of rules for predicting future prices that includes the rational expectations equilibrium rule, as well as rules that rely on more short-term information. The set of available rules evolves following a genetic algorithm; agents choose which rules to follow based on their past performance. While outcomes vary depending on the specific assumptions made, under a plausible set of assumptions investors can fail to anticipate shortages properly, leading to significant price spikes that would not occur in the rational expectations equilibrium.

The final essay addresses the impacts of carbon cap-and-trade policies on consumers. Riddle calculates how higher carbon prices would affect the prices of different consumer goods, how consumers would respond to the price changes, and how the price changes, along with revenue recycling, would impact consumers of different income levels.