Demand for oil is very price inelastic.  Facing such demand, an extractive cartell induces the highest price that does not destroy its demand, unlike the conventional Hotelling analysis: the cartel tolerates ordinary substitutes to its oil but deters high-potential ones.  Limit-pricing...

This paper questions the ability of a carbon tax to reduce oil extraction. Demand for oil is very price inelastic. Facing such demand, an extractive cartel induces the highest price that does not destroy its demand; it tolerates "non-drastic" substitutes but deters substitution possibilities that...