IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v36y2014i2p542-555.html
   My bibliography  Save this article

On capturing foreign oil rents

Author

Listed:
  • Keutiben, Octave

Abstract

A common assumption in the literature on tariff and exhaustible resources is that no stocks of the resource are available within the importing country's borders and therefore the importing country is not itself a producer. Reality is in fact quite different: there are many instances of countries that are simultaneously importers and producers of an exhaustible energy resource. This paper makes use of a spatial trade model that departs from this restriction and examines the rent-extracting tariff in a more general framework where the importing country is allowed to have access to a stock of the resource of its own and to determine simultaneously the optimal tariff and the rate of depletion of its own stock. Allowing the importing country to hold some resource deposits reduces the available rent to foreign producers and, in essence, reinforces the ability of the importer to capture the foreign rent. In effect, the optimal tariff is shown to be a decreasing function of the initial resource stock in the importing country. Interestingly, the paper identifies the spatial distribution of consumers as the primary reason of time-inconsistency.

Suggested Citation

  • Keutiben, Octave, 2014. "On capturing foreign oil rents," Resource and Energy Economics, Elsevier, vol. 36(2), pages 542-555.
  • Handle: RePEc:eee:resene:v:36:y:2014:i:2:p:542-555
    DOI: 10.1016/j.reseneeco.2013.06.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928765513000511
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.reseneeco.2013.06.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Karp, Larry & Newbery, David M., 1993. "Intertemporal consistency issues in depletable resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 19, pages 881-931, Elsevier.
    2. Loury, Glenn C, 1986. "A Theory of 'Oil'igopoly: Cournot Equilibrium in Exhaustible Resource Markets with Fixed Supplies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 285-301, June.
    3. Karp, Larry & Newbery, David M., 1991. "Optimal tariffs on exhaustible resources," Journal of International Economics, Elsevier, vol. 30(3-4), pages 285-299, May.
    4. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, October.
    5. Amitrajeet A. Batabyal & Hamid Beladi, 2008. "A Stackelberg Game Model Of Trade In Renewable Resources With Competitive Sellers," World Scientific Book Chapters, in: Dynamic And Stochastic Approaches To The Environment And Economic Development, chapter 7, pages 103-121, World Scientific Publishing Co. Pte. Ltd..
    6. Groot, Fons & Withagen, Cees & de Zeeuw, Aart, 2003. "Strong time-consistency in the cartel-versus-fringe model," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 287-306, November.
    7. Maskin, Eric S & Newbery, David M, 1990. "Disadvantageous Oil Tariffs and Dynamic Consistency," American Economic Review, American Economic Association, vol. 80(1), pages 143-156, March.
    8. James Brander & Slobodan Djajic, 1983. "Rent-Extracting Tariffs and the Management of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 288-298, May.
    9. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39, pages 137-137.
    10. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-1093, October.
    11. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
    12. Larry Karp & David M. Newbery, 1992. "Dynamically Consistent Oil Import Tariffs," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 1-21, February.
    13. Kenji Fujiwara & Ngo Long, 2011. "Welfare Implications of Leadership in a Resource Market under Bilateral Monopoly," Dynamic Games and Applications, Springer, vol. 1(4), pages 479-497, December.
    14. Kolstad Charles D., 1994. "Hotelling Rents in Hotelling Space: Product Differentiation in Exhaustible Resource Markets," Journal of Environmental Economics and Management, Elsevier, vol. 26(2), pages 163-180, March.
    15. Kenji Fujiwara & Ngo Van Long, 2012. "Optimal Tariffs On Exhaustible Resources: The Case Of Quantity-Setting," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 1-17.
    16. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    17. Salo, Seppo & Tahvonen, Olli, 2001. "Oligopoly equilibria in nonrenewable resource markets," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 671-702, May.
    18. Tracy R. Lewis & Richard Schmalensee, 1980. "On Oligopolistic Markets for Nonrenewable Natural Resources," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 475-491.
    19. Santiago Rubio, 2011. "On Capturing Rent from a Non-renewable Resource International Monopoly: Prices Versus Quantities," Dynamic Games and Applications, Springer, vol. 1(4), pages 558-580, December.
    20. Karp, Larry, 1984. "Optimality and consistency in a differential game with non-renewable resources," Journal of Economic Dynamics and Control, Elsevier, vol. 8(1), pages 73-97, October.
    21. Liski, Matti & Tahvonen, Olli, 2004. "Can carbon tax eat OPEC's rents?," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 1-12, January.
    22. Tahvonen, Olli, 1996. "Trade with Polluting Nonrenewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 1-17, January.
    23. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    2. Voss, Achim & Schopf, Mark, 2021. "Lobbying over exhaustible-resource extraction," European Economic Review, Elsevier, vol. 135(C).
    3. Daniel Nachtigall, 2017. "Prices versus Quantities: The Impact of Fracking on the Choice of Climate Policy Instruments in the Presence of OPEC," Working Papers 2017001, Berlin Doctoral Program in Economics and Management Science (BDPEMS).
    4. Nachtigall, Daniel, 2017. "Prices versus quantities: The impact of fracking on the choice of climate policy instruments in the presence of OPEC," Discussion Papers 2017/6, Free University Berlin, School of Business & Economics.
    5. Octave Keutiben, 2018. "Exhaustible resources flows in a spatial context," Letters in Spatial and Resource Sciences, Springer, vol. 11(1), pages 71-83, March.
    6. Achim Voss & Mark Schopf, 2014. "Lobbying over Exhaustible-Resource Extraction," Working Papers CIE 80, Paderborn University, CIE Center for International Economics.
    7. Jon Strand, 2010. "Taxes versus Cap-and-Trade in Climate Policy when only some Fuel Importers Abate," CESifo Working Paper Series 3233, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    2. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    3. Kenji Fujiwara & Ngo Long, 2011. "Welfare Implications of Leadership in a Resource Market under Bilateral Monopoly," Dynamic Games and Applications, Springer, vol. 1(4), pages 479-497, December.
    4. Santiago Rubio, 2011. "On Capturing Rent from a Non-renewable Resource International Monopoly: Prices Versus Quantities," Dynamic Games and Applications, Springer, vol. 1(4), pages 558-580, December.
    5. Rubio, Santiago J. & Escriche, Luisa, 2001. "Strategic pigouvian taxation, stock externalities and polluting non-renewable resources," Journal of Public Economics, Elsevier, vol. 79(2), pages 297-313, February.
    6. Gerlagh, Reyer & Liski, Matti, 2011. "Strategic resource dependence," Journal of Economic Theory, Elsevier, vol. 146(2), pages 699-727, March.
    7. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    8. Jaakkola, Niko, 2019. "Carbon taxation, OPEC and the end of oil," Journal of Environmental Economics and Management, Elsevier, vol. 94(C), pages 101-117.
    9. Okullo, Samuel J. & Reynès, Frédéric, 2016. "Imperfect cartelization in OPEC," Energy Economics, Elsevier, vol. 60(C), pages 333-344.
    10. Groot, Fons & Withagen, Cees & de Zeeuw, Aart, 2003. "Strong time-consistency in the cartel-versus-fringe model," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 287-306, November.
    11. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    12. Santiago J. Rubio, 2004. "On Capturing Oil Rents with a National Excise Tax Revisited," Working Papers 2004.133, Fondazione Eni Enrico Mattei.
    13. Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
    14. Berk, Istemi, 2015. "Two-Period Resource Duopoly with Endogenous Intertemporal Capacity Constraints," EWI Working Papers 2014-13, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    15. Santiago J. Rubio, 2005. "Tariff Agreements And Non-Renewable Resource International Monopolies: Prices Versus Quantitites," Working Papers. Serie AD 2005-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    16. Benchekroun, Hassan & Withagen, Cees, 2012. "On price taking behavior in a nonrenewable resource cartel–fringe game," Games and Economic Behavior, Elsevier, vol. 76(2), pages 355-374.
    17. Benchekroun, Hassan & Halsema, Alex & Withagen, Cees, 2009. "On nonrenewable resource oligopolies: The asymmetric case," Journal of Economic Dynamics and Control, Elsevier, vol. 33(11), pages 1867-1879, November.
    18. Strand, Jon, 2013. "Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 202-218.
    19. Amundsen, Eirik Schrøder & Bergman, Lars, 2005. "International Redistribution of Resource Rents: An alternative perspective on the Kyoto process," Working Papers in Economics 08/05, University of Bergen, Department of Economics.
    20. Kollenbach, Gilbert & Schopf, Mark, 2022. "Unilaterally optimal climate policy and the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).

    More about this item

    Keywords

    Exhaustible resources; Tariff; Oil rent; Differential game; Open loop; Stackelberg equilibrium; Spatial model;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:36:y:2014:i:2:p:542-555. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.