Economics More on Exhaustible Resources Producers don't extract and sell as fast as possible as long as their property rights to the resource are assured. Rational producers are always comparing their stock's use value if extracted versus its asset value if left in the ground. If resource markets overlook these costs, prices are lower and depletion is faster than socially optimal. Some governments levy a per-unit severance tax on mineral resources. This shifts MC up, raising current prices and reducing rents, and reducing current consumption.
Price grows more slowly than without the tax.
Time to depletion is extended. Resource monopolies conserve more than is socially optimal , by restricting output to drive up price. Resource monopolies involve higher initial prices, lower initial consumption levels and longer depletion schedules than competetive resource markets. Historic trends in crude oil and natural gas reserves clearly refute depletion forecasts based on static reserve indices. Tietenberg's discussion of natural gas markets in the US illustrates the dangers of unnecessary regulation of resource markets.