Aggressive oil extraction and precautionary saving: Coping with volatility.
The effects of stochastic oil demand on optimal oil extraction paths and tax, spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic. Without prudence, optimal oil extraction is governed by the Hotelling rule and optimal budgetary policies...
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| Format: | Journal article |
| Language: | English |
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Elsevier
2010
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| _version_ | 1797053925907496960 |
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| author | van der Ploeg, F |
| author_facet | van der Ploeg, F |
| author_sort | van der Ploeg, F |
| collection | OXFORD |
| description | The effects of stochastic oil demand on optimal oil extraction paths and tax, spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic. Without prudence, optimal oil extraction is governed by the Hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle. Volatile oil demand brings forward oil extraction and induces a bigger government surplus. With prudence, the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward, especially if it has substantial monopoly power on the oil market, gives high priority to the public spending target, is very prudent, and future oil demand has high variance. Uncertain economic prospects induce even higher precautionary saving and, if non-oil revenue shocks and oil revenue shocks are positively correlated, even more aggressive oil extraction. In contrast, prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving, but less so if uncertainty about reserves and oil demand are positively correlated. |
| first_indexed | 2024-03-06T18:50:24Z |
| format | Journal article |
| id | oxford-uuid:100647b4-5a2c-4b60-ab9d-5b196ec8d9a9 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T18:50:24Z |
| publishDate | 2010 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:100647b4-5a2c-4b60-ab9d-5b196ec8d9a92022-03-26T09:54:13ZAggressive oil extraction and precautionary saving: Coping with volatility.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:100647b4-5a2c-4b60-ab9d-5b196ec8d9a9EnglishDepartment of Economics - ePrintsElsevier2010van der Ploeg, FThe effects of stochastic oil demand on optimal oil extraction paths and tax, spending and government debt policies are analyzed when the oil demand schedule is linear and preferences quadratic. Without prudence, optimal oil extraction is governed by the Hotelling rule and optimal budgetary policies by the tax and consumption smoothing principle. Volatile oil demand brings forward oil extraction and induces a bigger government surplus. With prudence, the government depletes oil reserves even more aggressively and engages in additional precautionary saving financed by postponing spending and bringing taxes forward, especially if it has substantial monopoly power on the oil market, gives high priority to the public spending target, is very prudent, and future oil demand has high variance. Uncertain economic prospects induce even higher precautionary saving and, if non-oil revenue shocks and oil revenue shocks are positively correlated, even more aggressive oil extraction. In contrast, prudent governments deliberately underestimate oil reserves which induce less aggressive oil depletion and less government saving, but less so if uncertainty about reserves and oil demand are positively correlated. |
| spellingShingle | van der Ploeg, F Aggressive oil extraction and precautionary saving: Coping with volatility. |
| title | Aggressive oil extraction and precautionary saving: Coping with volatility. |
| title_full | Aggressive oil extraction and precautionary saving: Coping with volatility. |
| title_fullStr | Aggressive oil extraction and precautionary saving: Coping with volatility. |
| title_full_unstemmed | Aggressive oil extraction and precautionary saving: Coping with volatility. |
| title_short | Aggressive oil extraction and precautionary saving: Coping with volatility. |
| title_sort | aggressive oil extraction and precautionary saving coping with volatility |
| work_keys_str_mv | AT vanderploegf aggressiveoilextractionandprecautionarysavingcopingwithvolatility |