A diversified portfolio: joint management of non-renewable and renewable resources offshore Linda Fernandez * Department of Environmental Sciences, University of California, Riverside, CA 92521, USA Accepted 16 September 2004 Available online 21 December 2004 Abstract Most resource models and resource policies address non-renewable and renewable resources separately for optimal management. A stochastic control model is developed that includes ecological and economic uncertainty for jointly managing both types of natural resources. The model is applied to analyze options for offshore oil platforms with data from California. Model components include fisheries benefits, maintenance and extraction costs, decommissioning costs, and the market value of oil. Numerical sensitivity analysis helps determine how these components affect the options of removing and salvaging the platform, continuing diversified resource production or delaying extraction activity. # 2004 Elsevier B.V. All rights reserved. JEL classification: G11; Q20; Q30; L71 Keywords: Offshore oil extraction; Resource portfolio 1. Introduction With energy independence becoming more critical, the U.S. has renewed focus on offshore oil drilling platforms (U.S. COP, in press). Offshore oil development has occurred in leased tracts in California and Gulf of Mexico waters (off of Texas, Louisiana, www.elsevier.com/locate/econbase Resource and Energy Economics 27 (2005) 65–82 * Tel.: +1 951 827 2955; fax: +1 951 827 3993. E-mail address: linda.fernandez@ucr.edu. 0928-7655/$ – see front matter # 2004 Elsevier B.V. All rights reserved. doi:10.1016/j.reseneeco.2004.09.001