The Uncertainty Analysis for Exploration and Extraction of Nonrenewable Resources

A stochastic dynamic planning model with jump processes is presented for nonrenewable resources under two kinds of uncertainties.One source of uncertainty is in the reserve level and the other is in the economic environment,which affects resource supply and demand respectively.Moreover,although the reserve uncertainty will accelerate the rate at which price increases,exploratory activity will have a reverse effect.Therefore,the producers have to balance the loss caused by demand fluctuations against the proceeds from reserve fluctuations.