Petroleum Economics

ECN420 Petroleum Economics

Spring 2022

  • Topics

    The course consists of five parts: (i) Introduction to petroleum markets, (ii) Oil market theories, (iii) Petroleum taxation and wealth management, and (iv) Energy and the environment. Part (i) gives an overview of petroleum markets today, including resource allocation, production, trade, and the role of both renewable and non-renewable energy in the world economy. This part also gives the historical perspective. Part (ii) presents theories for modelling the oil market. We consider different market structures, such as perfect competition, monopoly, and price leadership, and relate this to the oil market. In part (iii), we cover the management of petroleum wealth from a macro perspective, and resource taxation. We cover the basic principles of petroleum taxation and investigate the Norwegian petroleum taxation system and how it has evolved over time. Part (iv) deals with how climate change and climate regulations affect energy markets, including how the ongoing renewable energy transition affects petroleum demand and production. We consider specific markets, such as the transportation sector, where we explore how recent fuel-efficiency and emissions reductions policies affect energy use, and we consider the macro implications for a petroleum-dependent economy such as Norway of a transition towards a low-emissions future.

  • Learning outcome


    Upon successful completion the student

    • can demonstrate knowledge of the global markets for oil and natural gas and their organization, and how this is affected by environmental and climate policies.
    • can demonstrate knowledge of the economic concepts underlying petroleum production and use.
    • can demonstrate a solid understanding of the main principles of petroleum taxation, including the main components of the Norwegian petroleum taxation system and their motivation.
    • will have a critical and reflective understanding of the predictive power of theories introduced in the course.


    Upon successful completion the student can

    • formulate and analyze economic models of resource depletion and market competition, both analytically and empirically.
    • discuss the major events and developments in the history of the petroleum industry, and the development of the price of oil up until today.
    • explain how local, regional, and global policies and institutions affect energy markets and prices today and in the future.

    General competence

    upon successful completion the student can

    • develop advanced technical skills, analytical decision making and problem solving.

  • Teaching

    Lectures (plenary and online), classroom discussions and homework assignments.

  • Recommended prerequisites

    Intermediate microeconomics and a basic knowledge of calculus recommended.

  • Credit reduction due to overlap


  • Requirements for course approval

    Students must actively participate on the class blog during the semester. The minimum requirement is to write three blog posts (of at least 150 words each).

  • Assessment

    There are two forms of assessment in the course:

    • Portfolio of homework assignments (50%): Students will be given several homework assignments throughout the semester, between January and April. They will have at least two weeks to solve each assignment. All assignments will be evaluated (score), and each student’s three best homework scores will count towards the final grade.
    • At-home final exam (50%): An online, 4-hour exam at the end of the semester.

  • Grading Scale


  • Computer tools

    Some use of statistical software such as R or Stata.

  • Literature

    Selected book chapters and articles from academic journals (some mandatory, some recommended), including but not limited to:

    • Hannesson, R. (1998). Petroleum economics: issues and strategies of oil and natural gas production. Westport, Conn.: Quorum. [Selected chapters]
    • Covert, T, M. Greenstone & C.R. Knittel. 2016. Will we ever stop using fossil fuels? Journal of Economic Perspectives 30(1): 117-138.
    • Baumeister, C. & L. Kilian. 2016. Forty years of oil price fluctuations: Why the price of oil may still surprise us. Journal of Economic Perspectives 30(1): 139-160.
    • Gaudet, G. 2007. Natural resource economics under the rule of Hotelling. Canadian Journal of Economics 40(4): 1033-1059.
    • Livernois, J. 2009. On the empirical significance of the Hotelling rule. Review of Environmental Economics and Policy 3(1): 22-41.
    • Chakravorty, U., B. Magne, and M. Moreaux. 2006. A Hotelling model with a ceiling on the stock of pollution. Journal of economic Dynamics and Control 30(12): 2875-2904.
    • Gaudet, G. and P. Lasserre. 2015. The taxation of nonrenewable natural resources. Chapter 4 in Handbook on the Economics of Natural Resources, Halvorsen, R. and Layton, D.F. (eds.). Edward Elgar Publishing.
    • Lund, D. 2014. State participation and taxation in Norwegian petroleum: Lessons for others? Energy Strategy Reviews 3: 49-54.
    • Knittel, C.R. 2012. Reducing petroleum consumption from transportation. Journal of Economic Perspectives 26(1): 93-118.
    • Anderson, M.L. and Aufhammer, M. 2014. Pounds that kill: The external costs of vehicle weight. Review of Economic Studies 81(2): 535-571.
    • Larrick, R.P. and J.B. Soll. 2008. The MPG Illusion. Science 320: 1593-1594.
    • Heyes, A., Leach, A., & Mason, C. F. (2018). The economics of Canadian oil sands. Review of Environmental Economics and Policy, 12(2), 242-263.
    • Sandler, R. 2012. Clunkers or Junkers? Adverse Selection in a Vehicle Retirement Program. American Economic Journal: Economic Policy 4(4): 253-281.
    • van den Bremer, T., F. van der Ploeg, and S. Wills. 2016. The elephant in the ground: Managing oil and sovereign wealth. European Economic Review 82: 113-131.
    • van der Ploeg, F., & Rezai, A. (2020). The risk of policy tipping and stranded carbon assets. Journal of Environmental Economics and Management, 100, 102258.
    • Atanasova, C., & Schwartz, E. S. (2019). Stranded fossil fuel reserves and firm value (No. w26497). National Bureau of Economic Research.
    • Jakob, M., & Hilaire, J. (2015). Climate science: Unburnable fossil-fuel reserves. Nature, 517(7533), 150-152.
    • Bang, G., & Lahn, B. (2019). From oil as welfare to oil as risk? Norwegian petroleum resource governance and climate policy. Climate Policy, 1-13.

    In addition: Selected reports.


ECTS Credits
Teaching language

Spring. Not offered spring 2022.

Course responsible

Linda Nøstbakken, Department of Economics.