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Estimation of Macroeconomic Effects from the Decline in Oil Export Duty

Listed author(s):
  • Zubarev, Andrey V.

    ()

    (the Centre for Economic Modeling of Energy and Environment of the Russian Presidential Academy of National Economy and Public Administration)

  • Polbin, Andrey V.

    ()

    (the Centre for Economic Modeling of Energy and Environment of the Russian Presidential Academy of National Economy and Public Administration)

The article studies macroeconomic effects of reducing oil export duty, depending on various development scenarios for oil refining sector and the implemented economic policy measures in the framework of neoclassical general equilibrium model for the Russian economy. Relevance of the work is based on the fact that oil export duty subsidises both oil refining industry, allowing it to exist in the market with low efficiency compared with foreign producers, and petroleum customers, which translates into a lower cost of petroleum products as compared to the world prices. Our paper mainly focuses on a comparison of the different effects of the tax manoeuvre on the abolition of oil export duty. The positive effects can arise from increase in the efficiency of the oil refining industry, which the abolition of export duty on crude oil should create incentives for. The negative effects on the economy are mainly related to the appreciation of the prices for the most important factors of production — oil and petroleum products, which can lead to a loss in competitiveness of Russian non-energy export. The transition process to the new efficient technologies is set exogenously in the model. It is expected that the abolition of oil export duty will force companies to carry out the modernisation of production process. In this case, we build scenarios with gradual reduction of tariffs in 5–7 years that should not lead to the collapse in the domestic petroleum products market in the short run due to the inability of certain enterprises rapidly switch to the new technologies. It is shown that in the current economic environment with low oil prices, this tax reform can be virtually painless for the economy. At the same time, if considered economic policy measure will force the oil refining industry to modernise its production facilities, there will be a positive effect on output in the economy and the welfare of domestic economic agents in the long run.

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Article provided by Russian Presidential Academy of National Economy and Public Administration in its journal Economic Policy.

Volume (Year): 6 (2016)
Issue (Month): (December)
Pages: 8-35

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Handle: RePEc:rnp:ecopol:ep1661
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