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The Visible Hand: National Oil Companies, Oil Supply and the Ermergence of the Hotelling Rent

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  • Markus Ludwig

    ()
    (University of Basel)

Abstract

Using firm-level panel data, this paper exposes differences� in the dynamic oil produc- tion regime between private and state-owned firms. I find that state-owned firms reduce the oil supply, ceteris paribus, by 3.5 percent each year, but private firms hold output constant. Furthermore, state-owned firms have not followed� such stringent policy before 1997. My ex- tension of the Hotelling-model attributes the behavior of state-owned firms to a scarcity� rent, whereas private firms produce at their constant capacity limit, owing to possible expropriation. The theory also indicates that state-owned firms will only switch to a Hotelling-regime� after a certain lag time, attributable to limited capacity.� The data further reveals that contractions in the supply of state-owned oil lead to oil price increases, indicating� that state-owned firms do, in fact, generate a scarcity rent. My results therefore suggest that the shift from private towards state-owned oil dominance in the 1970s gave rise to a delayed increasing oil price path.

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Bibliographic Info

Paper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2012/11.

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Handle: RePEc:bsl:wpaper:2012/11

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Related research

Keywords: Hotelling-rent; oil supply; national firms;

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References

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  1. Eduardo Engel & Ronald Fischer, 2008. "Optimal Resource Extraction Contracts under Threat of Expropriation," Levine's Bibliography 122247000000001833, UCLA Department of Economics.
  2. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," NBER Working Papers 15002, National Bureau of Economic Research, Inc.
  3. John Livernois, 2009. "On the Empirical Significance of the Hotelling Rule," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 22-41, Winter.
  4. Wolf, Christian, 2009. "Does ownership matter? The performance and efficiency of State Oil vs. Private Oil (1987-2006)," Energy Policy, Elsevier, vol. 37(7), pages 2642-2652, July.
  5. Junsoo Lee & John A. List & Mark C. Strazicich, 2005. "Nonrenewable Resource Prices: Deterministic or Stochastic Trends?," Working Papers 05-20, Department of Economics, Appalachian State University.
  6. John Livernois & Henry Thille & Xianqiang Zhang, 2006. "A test of the Hotelling rule using old-growth timber data," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 163-186, February.
  7. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September.
  8. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  9. Chen, K.C. & Chen, Shaoling & Wu, Lifan, 2009. "Price causal relations between China and the world oil markets," Global Finance Journal, Elsevier, vol. 20(2), pages 107-118.
  10. Berck, Peter & Roberts, Michael, 1996. "Natural Resource Prices: Will They Ever Turn Up?," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 65-78, July.
  11. Stacy Eller & Peter Hartley & Kenneth Medlock, 2011. "Empirical evidence on the operational efficiency of National Oil Companies," Empirical Economics, Springer, vol. 40(3), pages 623-643, May.
  12. Slade, Margaret E., 1982. "Trends in natural-resource commodity prices: An analysis of the time domain," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 122-137, June.
  13. repec:ebl:ecbull:v:3:y:2006:i:14:p:1-12 is not listed on IDEAS
  14. Long, Ngo Van, 1975. "Resource extraction under the uncertainty about possible nationalization," Journal of Economic Theory, Elsevier, vol. 10(1), pages 42-53, February.
  15. Lee, Kiseok & Ni, Shawn, 2002. "On the dynamic effects of oil price shocks: a study using industry level data," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 823-852, May.
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