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

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  • Ludwig, Markus

    () (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 NEWLINE 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 NEWLINE 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.

Suggested Citation

  • Ludwig, Markus, 2012. "The Visible Hand: National Oil Companies, Oil Supply and the Ermergence of the Hotelling Rent," Working papers 2012/11, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2012/11
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    References listed on IDEAS

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    Keywords

    Hotelling-rent; oil supply; national firms;

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