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| Tekijä: | Ploeg, V. can der |
| Otsikko: | Aggressive oil extraction and precautionary saving: coping with volatility |
| Lehti: | Journal of Public Economics
2010 : JUN, VOL. 94:5-6, p. 421-433 |
| Asiasana: | volatility stochastic processes profit prices taxation oil prices oil revenues petroleum industry demand policy |
| Kieli: | eng |
| Tiivistelmä: | The impacts of stochastic oil demand on optimal oil extraction paths and tax, spending and government debt policies are discussed in the case of linear oil demand schedule quadratic preferences. Without prudence, optimal oil extraction is governed by the Hotelling rule and optimal budget policies by the principle of tax and consumption smoothing. Volatile oil demand advances oil extraction, raising government surplus. With prudence, the government runs the oil reserves through even more aggressively and achieves savings financed by postponing spending and bringing taxes forward, particularly if it has considerable monopoly power on the oil market, emphasizes the public spending target, is very prudent, leading to high variance of future oil demand. Uncertain economic prospects cause even higher precautionary saving and, if non-oil and oil revenue shocks have positive correlation, even more aggressive oil extraction. On the contrary, prudent governments deliberately underestimate oil reserves, inducing less aggressive oil depletion and smaller government saving. However, the effect is weaker if uncertainty about reserves and oil demand are positively correlated. |
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