UNITIZATION OF OIL RESERVES IN ALASKA AND THE SUPPLY ELASTICITY OF A COMMON POOL RESOURCE

Abstract

Unitization, a common but not omnipresent policy that is lauded in both the economics and environmental worlds for its efficiency, attempts to solve the “tragedy of the commons” common pool failure of oil production by creating a system in which all those with interests in one reserve produce jointly and split profits accordingly. This paper empirically demonstrates what other researchers have hypothesized – that unitization reduces the elasticity of supply with respect to price. It then extrapolates to potential impacts this policy could have on the environment at large by forecasting a future production path based on the model from the previous section. Finally, it demonstrates how unitization could slow the accumulation of greenhouse gases in the atmosphere.