JOURNAL ARTICLES

• Herrnstadt, Evan, Ryan Kellogg, and Eric Lewis, Drilling Deadlines and Oil and Gas Development, Econometrica 92 (2024), 29-60.
  - Working paper , NBER working paper #27165 (with old title 'The Economics of Time-Limited Development Options: The Case of Oil and Gas Leases')

  [abstract]

  Oil and gas leases between mineral owners and extraction firms typically specify a date by which the firm must either drill a well or lose the lease. These deadlines are known as primary terms. Using data from the Louisiana shale boom, we first show that well drilling is substantially bunched just before the primary term deadline. This bunching is not necessarily surplus-reducing: using an estimated model of firms' drilling and input choices, we show that primary terms can increase total surplus by countering the effects of leases' royalties, as royalties are a tax on revenue and delay drilling. These benefits are reduced, however, when production outcomes are sensitive to drilling inputs and when drilling one well indefinitely extends the period of time during which additional wells may be drilled. We enrich the model to consider mineral owners' lease offers and find small effects of primary terms on owners' revenue.

• Borenstein, Severin and Ryan Kellogg, Carbon Pricing, Clean Electricity Standards, and Clean Electricity Subsidies on the Path to Zero Emissions, Environmental and Energy Policy and the Economy 4 (2023), 125-176.
  - Working paper , NBER working paper #30263

  [abstract]

  We categorize the primary incentive-based mechanisms under consideration for addressing greenhouse gas emissions -- pricing carbon, intensity standards, and subsidizing clean energy -- and compare their market outcomes under similar expansions of clean electricity generation. While pricing emissions gives strong incentives to first eliminate generation with the highest social cost, a clean energy standard incentivizes earliest phaseout of the most privately costly generation. We show that the importance of this distinction depends on the correlation between private costs and emissions rates, and we estimate this correlation for US electricity generation and fuel prices as of 2019. The emissions difference between a carbon tax and clean energy standard that phases out fossil fuel generation over the same timeframe may actually be quite small, though it depends on fossil fuel prices during the phaseout. We also discuss how each of these policy options is likely to impact electricity prices and quantity demanded, highlighting that large pre-existing markups of retail prices over generation costs are likely to considerably weaken or even reverse the usual assumed efficiency advantage of carbon pricing policies over alternatives.

• Kellogg, Ryan, Output and Attribute-Based Carbon Regulation Under Uncertainty, Journal of Public Economics 190 (October, 2020), 104246.
  - Working paper , NBER working paper #26172

  [abstract]

  Output-based carbon regulations---such as fuel economy standards and the rate-based standards in the Clean Power Plan---create well-known incentives to inefficiently increase output. Similar distortions are created by attribute-based regulations. This paper demonstrates that, despite these distortions, output and attribute-based standards can always yield strictly greater expected welfare than ``flat'' emission standards given uncertainty in demand for output (or attributes), assuming locally constant marginal damages. For fuel economy standards, the welfare-maximizing amount of attribute or mileage-basing is likely small relative to current policy. For the electricity sector, however, an intensity standard may yield greater expected welfare than a flat standard.

• Anderson, Soren T., Ryan Kellogg, and Stephen W. Salant, Hotelling Under Pressure, Journal of Political Economy 126 (June, 2018), 984-1026.
  - Working paper , NBER working paper #20280

  [abstract]

  We show that oil production from existing wells in Texas does not respond to price incentives. Drilling activity and costs, however, do respond strongly to prices. To explain these facts, we reformulate Hotelling's (1931) classic model of exhaustible resource extraction as a drilling problem: firms choose when to drill, but production from existing wells is constrained by reservoir pressure, which decays as oil is extracted. The model implies a modified Hotelling rule for drilling revenues net of costs and explains why production is typically constrained. It also rationalizes regional production peaks and observed patterns of price expectations following demand shocks.

• Kellogg, Ryan, Gasoline Price Uncertainty and the Design of Fuel Economy Standards, Journal of Public Economics 160 (April, 2018), 14-32.
  - Working paper , NBER working paper #23024

  [abstract]

  What are the implications of gasoline price volatility for the design of fuel economy policies? I show that this problem has a strong parallel to Weitzman's (1974) classic model of using price or quantity controls to regulate an externality. Changes in fuel prices act as shocks to the marginal cost of complying with the standard. Assuming constant marginal damages from fuel consumption, an application of Weitzman (1974) implies that a fixed fuel economy standard reduces expected welfare relative to a ''price'' policy such as a feebate or, equivalently, a fuel economy standard that is indexed to the price of gasoline. When the regulator is constrained to use a fixed standard, I show that the usual approach to setting the standard---equate expected marginal compliance cost to marginal damage---is likely to be sub-optimal because the standard may not bind if the realized gasoline price is sufficiently high. Instead, the optimal fixed standard will be relatively relaxed and may be non-binding even at the expected gasoline price. Finally, I show that although an attribute-based standard allows vehicle choices to flexibly respond to gasoline price shocks, the resulting distortions imply that the optimal fuel economy standard is not attribute-based.

• Albouy, David, Walter Graf, Ryan Kellogg, and Hendrik Wolff, Climate Amenities, Climate Change, and American Quality of Life, Journal of the Association of Environmental and Resource Economists 3 (March, 2016), 205-246.
  - Working paper , NBER working paper #18925

  [abstract]

  We present a hedonic framework to estimate U.S. households' preferences over local climates, using detailed weather and 2000 Census data. We find that Americans favor a daily average temperature of 65 degrees Fahrenheit, that they will pay more on the margin to avoid excess heat than cold, and that damages increase less than linearly over extreme cold. These preferences vary by location due to sorting or adaptation. Changes in climate amenities under business-as-usual predictions imply annual welfare losses of 1 to 4 percent of income by 2100, holding technology and preferences constant.

• Anderson, Soren T., Ryan Kellogg, Ashley Langer, and James M. Sallee, The Intergenerational Transmission of Automobile Brand Preferences: Empirical Evidence and Implications for Firm Strategy, Journal of Industrial Economics 63 (Dec., 2015), 763-793.
  - Working paper , NBER working paper #19535

  [abstract]

  We document a strong correlation in the brand of automobile chosen by parents and their adult children, using data from the Panel Study of Income Dynamics. This correlation could represent transmission of brand preferences across generations, or it could result from correlation in family characteristics that determine brand choice. We present a variety of empirical specifications that lend support to the former interpretation and to a mechanism that relies at least in part on state dependence. We then discuss implications of intergenerational brand preference transmission for automakers' product-line strategies and for the strategic pricing of vehicles to different age groups.

• Hausman, Catherine and Ryan Kellogg, Welfare and Distributional Implications of Shale Gas, Brookings Papers on Economic Activity (spring, 2015), 71-125.
  - Working paper , NBER working paper #21115

  [abstract]

  Technological innovations in horizontal drilling and hydraulic fracturing have enabled tremendous amounts of natural gas to be extracted profitably from underground shale formations that were long thought to be uneconomical. In this paper, we provide the first estimates of broad-scale welfare and distributional implications of this supply boom. We provide new estimates of supply and demand elasticities, which we use to estimate the drop in natural gas prices that is attributable to the supply expansion. We calculate large, positive welfare impacts for four broad sectors of gas consumption (residential, commercial, industrial, and electric power), and a negative impact for producers, with variation across regions. We then examine the evidence for a gas-led ''manufacturing renaissance'' and for pass-through to prices of products such as retail natural gas, retail electricity, and commodity chemicals. We conclude with a discussion of environmental externalities from unconventional natural gas, including limitations of the current regulatory environment. Overall, we find that the shale gas revolution has led to an increase in welfare for natural gas consumers and producers of $48 billion per year, but more data are needed on the extent and valuation of the environmental costs of shale gas production.

• Kellogg, Ryan, The Effect of Uncertainty on Investment: Evidence from Texas Oil Drilling, American Economic Review 104 (June, 2014), 1698-1734.
  - Working paper , NBER working paper #16541

  [abstract]

  This paper estimates the response of investment to changes in uncertainty using data on oil drilling in Texas and the expected volatility of the future price of oil. Using a dynamic model of firms' investment problem, I find that: (1) the response of drilling activity to changes in price volatility has a magnitude consistent with the optimal response prescribed by theory, (2) the cost of failing to respond to volatility shocks is economically significant, and (3) implied volatility data derived from futures options prices yields a better fit to firms' investment behavior than backward-looking volatility measures such as GARCH.

• Borenstein, Severin and Ryan Kellogg, The Incidence of an Oil Glut: Who Benefits from Cheap Crude Oil in the Midwest?, Energy Journal 35 (Jan., 2014), 15-33.
  - Working paper , NBER working paper #18127

  [abstract]

  Beginning in early 2011, crude oil production in the U.S. Midwest and Canada surpassed the pipeline capacity to transport it to the Gulf Coast where it could access the world oil market. As a result, the U.S. ''benchmark'' crude oil prices in Cushing, Oklahoma, declined substantially relative to internationally traded oil. In this paper, we study how this development affected prices for refined products, focusing on the markets for motor gasoline and diesel. We find that the relative decrease in Midwest crude oil prices did not pass through to wholesale gasoline and diesel prices. This result is consistent with evidence that the marginal gallon of fuel in the Midwest is still imported from coastal locations. Our findings imply that investments in new pipeline infrastructure between the Midwest and the Gulf Coast, such as the southern segment of the controversial Keystone XL pipeline, will not raise gasoline prices in the Midwest.

• Anderson, Soren T., Ryan Kellogg, and James M. Sallee, What Do Consumers Believe About Future Gasoline Prices?, Journal of Environmental Economics and Management 66 (Nov., 2013), 383-403.
  - Working paper , NBER working paper #16974

  [abstract]

  A full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices. We provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are typically indistinguishable from a no-change forecast, justifying an assumption commonly made in the literature on consumer valuation of energy efficiency. We also provide evidence on circumstances in which consumer forecasts are likely to deviate from no-change and on significant cross-consumer forecast heterogeneity.

• Borenstein, Severin, Meghan Busse, and Ryan Kellogg, Career Concerns, Inaction, and Market Inefficiency: Evidence from Utility Regulation, Journal of Industrial Economics 60 (June, 2012), 220-248.
  - Working paper , NBER working paper #13679

  [abstract]

  We study how incentive conflicts known as ``career concerns'' can generate inefficiencies not only within firms but also in market outcomes. Career concerns may lead agents to avoid actions that, while value-increasing in expectation, could potentially be associated with a bad outcome. We apply this theory to natural gas procurement by regulated public utilities and show that career concerns may lead to a reduction in surplus-increasing market transactions during periods when the benefits of trade are likely to be greatest. We show that data from natural gas markets are consistent with this prediction and difficult to explain using alternative theories.

• Kellogg, Ryan, Learning by Drilling: Inter-Firm Learning and Relationship Persistence in the Texas Oilpatch, Quarterly Journal of Economics 126 (Nov., 2011), 1961-2004.
  - Working paper , NBER working paper #15060

  [abstract]

  This paper examines learning-by-doing that is specific not just to individual firms but to pairs of firms working together in a contracting relationship. Using data from the oil and gas industry, I find that the productivity of an oil production company and its drilling contractor increases with their joint experience. This learning is relationship-specific: drilling rigs cannot fully appropriate the productivity gains acquired through experience with one production company to their work for another. This result is robust to ex ante match specificities. Moreover, producers' and rigs' contracting behavior is consistent with maximization of relationship-specific learning's productivity benefits.

• Auffhammer, Maximilian and Ryan Kellogg, Clearing the Air? The Effects of Gasoline Content Regulation on Air Quality, American Economic Review 101 (Oct., 2011), 2687-2722.
  - Working paper

  [abstract]

  This paper examines whether U.S. gasoline content regulations, which impose substantial costs on consumers, have successfully reduced ozone pollution. We take advantage of spatial and temporal variation in the regulations' implementation to show that federal gasoline standards, which allow refiners flexibility in choosing a compliance mechanism, did not improve air quality. This outcome occurred because minimizing the cost of compliance does not reduce emissions of those compounds most prone to forming ozone. In California, however, we find that precisely targeted, inflexible regulations requiring the removal of particularly harmful compounds significantly improved air quality.

• Anderson, Soren T., Ryan Kellogg, James M. Sallee, and Richard T. Curtin, Forecasting Gasoline Prices Using Consumer Surveys, American Economic Review Papers & Proceedings 101 (May, 2011), 110-114.
  - Working paper

  [abstract]

  This paper analyzes the predictive power of a new data set of consumer gasoline price forecasts taken from the Michigan Survey of Consumers (MSC). MSC data generally perform as well as a no-change forecast in predicting future gasoline prices, and they substantially out-perform the no-change forecast during the recent economic crisis, during which time they track futures market prices. Finally, the cross-respondent dispersion of the MSC forecasts increases substantially during the economic crisis, paralleling the large increase in price volatility at this time.

• Kellogg, Ryan and Hendrik Wolff, Daylight Time and Energy: Evidence from an Australian Experiment, Journal of Environmental Economics and Management 56 (2008), 207-220 (Recipient of the 2009 Best JEEM Paper Award.).
  - Working paper

  [abstract]

  Several countries are considering using Daylight Saving Time (DST) as a tool for energy conservation and reduction of greenhouse gas emissions, and the United States extended DST in 2007 with the goal of reducing electricity consumption. This paper assesses DST's impact on electricity demand by examining a quasi-experiment in which parts of Australia extended DST in 2000 to facilitate the Sydney Olympics. Using detailed panel data and a difference-in-difference-in-difference framework, we show that the extension did not reduce overall electricity consumption, but did cause a substantial intra-day shift in demand consistent with activity patterns that are tied to the clock rather than sunrise and sunset.