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Modeling the Impact of Taxes on Petroleum Exploration and Development

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  • James L. Smith

Abstract

We present a simple model of petroleum exploration and development that can be applied to study the performance of alternative tax systems and identify potential distortions. Although the model is a highly simplified, it incorporates many factors and some of the key tradeoffs that would influence an investor’s investment behavior. The model recognizes the role of enhanced oil recovery and treats the impact of taxation on exploration and development in an integrated manner consistent with an investor’s joint optimization of investments at both stages of the process. The model is simple and user-friendly, which facilitates application to a broad range of problems.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/278.

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Length: 46
Date of creation: 27 Nov 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/278

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Related research

Keywords: Taxes; Oil production; Taxation; Economic models; petroleum exploration; distortions; fiscal regimes; tax rates; marginal tax rates; tax distortions; tax liabilities; tax avoidance; tax instruments; fiscal impacts; fiscal design; tax system; tax policy; capital investment; form of taxation; petroleum taxation; corporate income tax; tax systems; tax revenues; government revenue; tax reform; fiscal systems; tax returns; income taxes; tax base; fiscal arrangements; fiscal designs; fiscal affairs; capital expenditures; fiscal costs; tax incentives; fiscal burden; tax accounting; taxable income; tax journal; optimal taxation; fiscal affairs department; tax impacts; effects of taxes; fiscal liabilities; public finance; national tax journal; corporate tax rate;

References

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  1. Lund, Diderik, 1992. "Petroleum taxation under uncertainty: contingent claims analysis with an application to Norway," Energy Economics, Elsevier, vol. 14(1), pages 23-31, January.
  2. Henry D. Jacoby & James L. Smith, 1985. "Effects of Taxes and Price Regulation on Offshore Gas," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
  3. Paolo M. Panteghini, 2005. "Asymmetric Taxation under Incremental and Sequential Investment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 761-779, December.
  4. Blake, Andon J. & Roberts, Mark C., 2006. "Comparing petroleum fiscal regimes under oil price uncertainty," Resources Policy, Elsevier, vol. 31(2), pages 95-105, June.
  5. Helmi-Oskoui, B. & Narayanan, R. & Glover, T. & Lyon, K. S. & Sinha, M., 1992. "Optimal extraction of petroleum resources : An empirical approach," Resources and Energy, Elsevier, vol. 14(3), pages 267-285, September.
  6. 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.
  7. James Poterba, 2010. "The Challenge of Tax Reform and Expanding the Tax Base," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 133-148.
  8. James L. Smith, 1995. "On the Cost of Lost Production from Russian Oil Fields," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 25-58.
  9. Adelman, M A, 1990. "Mineral Depletion, with Special Reference to Petroleum," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 1-10, February.
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Cited by:
  1. Cairns, Robert D., 2014. "The green paradox of the economics of exhaustible resources," Energy Policy, Elsevier, vol. 65(C), pages 78-85.

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