Petroleum Economics.

Petroleum Economics

Jean Masseron, Petroleum Economics (Paris: Editions Technip., 1990), 519 pages.

Most writers on petroleum find crude oil production enough of a challenge to seize their entire attention. This book seeks to cover all of petroleum -- oil from production to sales,

As is made clear only after you get past the title page, Masseron had four collaborators on the book. Francois Bonis-Charancle wrote the section on demand and marketing of petroleum products. Jacques Cheli did petrochemicals. Jean-Luc Karnik and Michel Valais covered natural gas. Masseron himself provided the introductory and concluding sections and the sections on crude oil markets, transportation and refining. The book was originally available only in French, but at some stage (possibly with this edition), an English version was added.

The economics are predominantly applied. Attention is on technologies, industry and government practice, and available data on quantities and costs. The emphasis on breadth results in considerable variation in the adequacy of the treatment. The strongest sections are those on oil refining, transportation, and marketing. The natural gas and petrochemical sections are good introductions; the crude oil section is too terse. Given the state of the literature noted initially and the already substantial size of the book, these seem reasonable choices. Emphasis is placed on issues where good additional material is hard to find. The main criticism that might be levied is that the bibliography provided is too scanty to guide neophytes.

The discussion starts with a 48-page overview that first rushes through the treatment of past and prospective consumption trends, investment levels, the uncertainty of drilling success, the role of transportation and refining, and the nature of the oil companies. Not surprisingly, this proves too cursory even as an introduction. Then roughly in the middle Masseron introduces the rise of OPEC and devotes the rest of the chapter to a good summary of OPEC-company relations and oil shocks.

The crude oil section is subdivided into a market chapter, a cost chapter, and a tax and legal aspect chapter. The first of these again tries to cover too much with widely variable success. It begins with three pages on the all-too-familiar shift from Texas Gulf pricing, and then turns to successive surveys of policy practices in the USA, Western Europe, CPEs, and OPEC, reserves, and pricing. The best discussions are those on pricing and OPEC, but even they are too limited. The basic concepts and problems are well explained, but too much is left hanging. As short as it is, the cost survey gives a good overview. The legal and tax discussion provides clear explanations of several of the regimes that have been in force. The role of national oil companies is slighted.