Four essays on the economics of oil and gas markets

Since the 1960s hydrocarbons like crude oil and natural gas have been the most important energy source to fuel the world economy. Despite high recent growth rates for renewable energies, hydro- carbons are expected to be a dominant source of energy for several decades to come. In the last 20 years not only fundamental trends, but also singular events such as the financial crisis have shaped the development of crude oil and natural gas markets as well as the corresponding academic debate. On a historic scale these last two decades have seen changes in oil and gas markets that - in terms of price and regional production changes - are only matched by the turmoils of the oil crisis of the 1970s. Hence, the objective of this thesis is to improve the understanding of some of the dynamics and trends underlying these developments. Around the turn of the millenium the growth of wealth and resource consumption in emerging economies and the fear of shrinking oil and gas production in industrialized countries refueled the time-honored debate about the point of time when the supply of fossil energy resources will reach its historic all time high. Labeled as the “peak oil hypothesis” the discussion gained most momentum for the case of crude oil, but similar worries were also expressed for natural gas. These solicitudes were also reflected and amplified by prolonged and steep increases in global oil and gas prices which in turn raises the question of how strong hydrocarbon supply will react to these price shocks. Accordingly, Chapter 2 of this thesis addresses oil and gas supply response to oil and gas price changes in the US. More specifically, because oil and gas supply can only be kept constant or increased by drilling additional wells, the essay focuses on the response of oil and gas drilling activity to changes in oil and gas prices as well as drilling costs...