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The taxation of UK oil and gas production: Why the windfalls got away

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  • Abdo, Hafez
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    Abstract

    Starting with evidence that United Kingdom Continental Shelf oil and gas companies have benefitted very disproportionately from the recent period of extraordinarily high oil prices, this paper traces the history of this weakness in the UK's petroleum fiscal regime. Evidence is provided that the progressive relaxations in the UK's petroleum fiscal regime in 1983, 1987-1988 and 1993 were: largely unnecessary to stimulate the development of new, smaller, 'marginal' fields; misguided in their assumption that such fields were more costly to develop than earlier counterparts or larger contemporary fields; and impotent compared with the effects of oil price movements. The paper concludes with a conceptualisation which illuminates why these failures of policy were not just random: they emerged from the UK's 'non-proprietorial' stance with respect to the country's oil and gas resources, a stance which assumes responsibility for oil company profitability and vainly tries to counter market forces at the expense of government revenues.

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    File URL: http://www.sciencedirect.com/science/article/B6V2W-5088MGF-1/2/65e2f7cbe55d787e67af6b4326f2e58d
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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 38 (2010)
    Issue (Month): 10 (October)
    Pages: 5625-5635

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    Handle: RePEc:eee:enepol:v:38:y:2010:i:10:p:5625-5635

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    Web page: http://www.elsevier.com/locate/enpol

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    Keywords: Oil Policy UKCS;

    References

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    1. Michael Saunders, 1987. "Oil taxation: the cross-field allowance," Fiscal Studies, Institute for Fiscal Studies, vol. 8(4), pages 55-68, December.
    2. Smith, B., 1999. "The Impossibility of a Neutral Resource Rent Tax," ANU Working Papers in Economics and Econometrics 1999-380, Australian National University, College of Business and Economics, School of Economics.
    3. Favero, C.A. & Pesaran, M.H., 1992. "Oil Investment in the North Sea," Cambridge Working Papers in Economics 9204, Faculty of Economics, University of Cambridge.
    4. Zhang, Lei, 1997. "Neutrality and Efficiency of Petroleum Revenue Tax: A Theoretical Assessment," Economic Journal, Royal Economic Society, vol. 107(443), pages 1106-20, July.
    5. Rutledge, Ian & Wright, Philip, 1998. "Profitability and taxation in the UKCS oil and gas industry: analysing the distribution of rewards between company and country," Energy Policy, Elsevier, vol. 26(10), pages 795-812, August.
    6. Michael Devereux, 1983. "Changes in the taxation of North Sea oil," Fiscal Studies, Institute for Fiscal Studies, vol. 4(2), pages 75-79, May.
    7. Smith, B., 1999. "The Impossibility of a Neutral Resource Rent Tax," Papers 380, Australian National University - Department of Economics.
    8. Garnaut, Ross & Clunies Ross, Anthony, 1975. "Uncertainty, Risk Aversion and the Taxing of Natural Resource Projects," Economic Journal, Royal Economic Society, vol. 85(338), pages 272-87, June.
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    Cited by:
    1. Abdo, Hafez, 2014. "Investigating the effectiveness of different forms of mineral resources governance in meeting the objectives of the UK petroleum fiscal regime," Energy Policy, Elsevier, vol. 65(C), pages 48-56.

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