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W.D. Walls

Submitted by mives on Fri, 09/28/2012 - 1:30pm
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David Walls joined the department in 2001.  He is the program adviser for the Concentration in Applied Energy Economics , and he teaches a range of energy economics courses---Petroleum Economics, Empirical Energy Economics, World Oil Markets---in addition to teaching a course on the Economics of the Movie Business.  His research is mostly applied microeconomics, with applications to the energy and entertainment industries.  His personal web page is located at http://pareto.ucalgary.ca, where you can view a complete listing of his research output and see photos of him riding his dirt bike in the Mojave desert.

In a recent paper, Walls and co-author M. Kendix examined empirically unplanned outages at petroleum refineries.  Refineries are the industrial plants that transform crude oil into liquid transportation fuels such as gasoline, diesel fuel, and jet fuel, and unplanned outages have caused major disruptions to transport fuel supplies in North America, which in turn have been associated with volatility in fuel prices.  An interesting empirical and policy-relevant question is the extent to which prices for refined petroleum products are affected by unplanned refinery outages.  The causes of particular refinery outages are many.  Extreme weather events, such as hurricane Katrina in 2005, can cause major disruptions to refining operations: that hurricane disabled some twenty-five percent of US refining capacity, causing prices of refined products to spike regionally as well as having market impacts on product prices and flows as far away as Canada and Europe.  More geographically isolated weather events, as well as other refinery-specific idiosyncratic events such as fires and equipment failures, can also have impacts on refining operations causing palpable supply disruptions.  For example, a severe storm in July 2009 led to the shutdown of the Petro-Canada and Imperial Oil refineries here in Alberta, causing about 15% of Petro-Canada's retail outlets in the province to run out of gasoline and necessitating emergency shipments from as far away as Montreal.  Other Alberta refinery outages led to shortages of gasoline in Western Canada in Summer 2008 and a shortage of diesel fuel in Fall 2008.  Refinery outages can have important economy-wide impacts---especially in North America---because the transportation infrastructure in many parts of the world is fueled by the finished petroleum products refined in close proximity to demand centers.  The evidence suggests that refinery outages in the US have had a very small positive (and statistically significant) impact on wholesale gasoline prices.  However, the impact of refinery outages is substantially larger for special `boutique' fuels than it is for conventional clear gasoline.  The policy implications is that a more fungible set of fuels would increase the capacity of the supply infrastructure and this would serve to mitigate the price impacts of idiosyncratic refinery outages. 

In another paper, Walls and co-author McKenzie, examine the role of Hollywood in the global movie market, where growing international film revenues---those generated outside the US and Canada---have become increasingly important, now accounting for more than two-thirds of worldwide box-office revenue.  Does Hollywood dominate world cinema markets with American taste, culture, and values through the exportation of films produced mainly for its domestic market?  Or does Hollywood supply the films that world audiences demand and, due to the logistics of distribution, screen these films first in the domestic (US and Canada) market prior to exhibition in foreign markets?  Walls and McKenzie empirically analyze the global market for motion pictures to provide statistical evidence that can speak to these questions.  They used a lot of whiz-bang econometric pyrotechnics (the sort of techniques that make most of our brains hurt) to examine data on nearly 2000 films exhibited from 1997--2007, inclusive, in the US and Canada, Australia, France, Germany, Mexico, Spain, and the UK---markets that today collectively account for over 75% of worldwide cinema box-office revenue.  The empirical evidence provides support for the hypothesis that the supply of Hollywood films has accommodated global demand as the relative size of the US domestic market has decreased.  There is no evidence that box-office success in the US creates a contagion that spreads to other film exhibition markets; however, box-office success in international markets appears to be less uncertain for films that have been successful in their US releases.    This change in the relative importance of domestic and international markets is associated with a substantial change in the attributes of films produced by the Hollywood film industry.

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