An oil company executive and an executive of a mining company meet during the coffee break of a conference about opportunities in the Canadian Arctic. “They say 30% of the world’s undiscovered oil is in the Arctic,” started the oil man. “We’ve drilled 43 exploratory wells and all but 17 of them were dry. Only two of those 17 are economical with the oil prices being projected for the next 10 years. The good news is that 90% of these projects get environmental approvals.”

“It’s just as bad in mining,” replied the mining executive. “We know where there’s uranium in Nunavut, but with the current unpopularity of nuclear power, we estimate the chance of it being profitable is less than 10%.

a) What method of probability assessment is being used by the mining executive?

b) What method of probability assessment is being used by the oil executive?

c) Draw a probability tree for drilling an exploratory oil well in the Arctic based on the information above.

d) Which probability(ies) in your tree is/are conditional?

e) If the oil company were to drill an exploratory oil well in the Arctic, what is the probability that the company would actually extract oil from it?