A Model of Optimal Dynamic Oil Extraction: Evidence From a Large Middle Eastern Field
AbstractWe model the economically optimal dynamicoil production decisions of a representative country whose oilfields resemble the largest developed oil field in Saudi Arabia,Ghawar. A government-controlled enterprise may base its oil productiondecisions on criteria other than maximization of the presentdiscounted value of profits. In particular, oil production decisionsare likely to reflect many political, strategic and geopoliticalmotives of the government. Our analysis of the optimal economicdecisions nevertheless enables one to assess the extent to whichlong-run value maximization is being followed. This in turn allowsone to judge the costs that political decisions are imposingin terms of foregone economic output, government revenue andforeign exchange. These costs ought to be of interest to policy-makerswithin Saudi-Arabia and also to external parties interested inmodifying Saudi pricing and production decisions. Copyright Kluwer Academic Publishers 2001
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Bibliographic InfoArticle provided by Springer in its journal Journal of Productivity Analysis.
Volume (Year): 15 (2001)
Issue (Month): 1 (January)
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Web page: http://www.springerlink.com/link.asp?id=100296
Dynamic structural model; world oil markets; engineering production functions; simulation;
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- Rudolfs Bems & Irineu E. Carvalho Filho, 2009.
"Current Account and Precautionary Savings for Exporters of Exhaustible Resources,"
IMF Working Papers
09/33, International Monetary Fund.
- Bems, Rudolfs & de Carvalho Filho, Irineu, 2011. "The current account and precautionary savings for exporters of exhaustible resources," Journal of International Economics, Elsevier, vol. 84(1), pages 48-64, May.
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