Energy futures: A new model for resource extraction and investment decisions

Prof Alexander David of the Haskayne School of Business, University of Calgary, has developed a new framework that demonstrates the strong link between the slope of the futures curve and long-run exploration and production decisions of energy companies. Prof David’s model analyses the trends seen in the oil market by examining the impact of resource extraction through drilling, the effects of the amount of the commodity that the firms store, and the firms’ investment in exploration and development on current and future prices. In his paper, Prof David asks how oil futures prices affect exploration decisions.Read his paper in the Review of Financial Studies here: https://doi.org/10.1093/rfs/hhy067