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On capturing foreign oil rents

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  • 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
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    References listed on IDEAS

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    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.
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    Cited by:

    1. 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.
    2. repec:spr:lsprsc:v:11:y:2018:i:1:d:10.1007_s12076-018-0201-x is not listed on IDEAS
    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).

    More about this item

    Keywords

    Exhaustible resources; Tariff; Oil rent; Differential game; Open loop; Stackelberg equilibrium; Spatial model;

    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)

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