Petroleum Economics

Chapter 6 Petroleum Economics – Uncertainty and Risk

INTRODUCTION

*Explain the difference between uncertainty and risk, in the context of investment

Uncertainty relates to a lack of knowledge about future events. There’s a quote from one of the US presidents that goes “there’s things we know we know, there’s things we know that we don’t know, but there’s also things we don’t know that we don’t know”. It’s a pretty thick quote but illustrates a point in the final section. That’s where uncertainty is born from. (more…)

Chapter 1 Petroleum Economics – Introduction

*Describe general financial aspects of the petroleum industry

General financial aspects of the petroleum industry.

Basically there is an opportunity to profit. Companies are formed to exploit reserves, they perform due diligence, take into account risks and make a decision on whether or not to drill and produce. Investment can come from venture capital companies, private investment or equity raising. Petroleum products can be sold in several different markets such as options, futures contracts or directly through shares of a company. (more…)

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