Export diversification and resource-based industrialization: the case of natural gas

For resource-rich economies, primary commodity specialization has often been considered to be detrimental to growth. Accordingly, export diversification policies centered on resource-based industries have long been advocated as effective ways to moderate the large variability of export revenues. This paper discusses the applicability of a mean-variance portfolio approach to design these strategies and proposes some modifications aimed at capturing the key features of resource processing industries (presence of scale economies and investment lumpiness). These modifications help make the approach more plausible for use in resource-rich countries. An application to the case of natural gas is then discussed using data obtained from Monte Carlo simulations of a calibrated empirical model. Lastly, the proposed framework is put to work to evaluate the performances of the diversification strategies implemented in a set of nine gas-rich economies. These results are then used to formulate some policy recommendations

Assessing the Economic Impact of an Agricultural Project in a Petroleum-Exporting Country. The Case of Palm Oil in the Republic of Congo

Agribusiness,

Exogenous Oil Shocks, Fiscal Policy and Sector Reallocations in Oil Producing Countries

Previous literature has suggested that different mechanisms of transmission of exogenous oil shocks are responsible for the negative effects on the economic performances of oil exporting countries. This paper aims at providing further evidence on the role of sectoral reallocation between private and public sectors in explaining the impact of shocks to oil revenues on the economic growth rates of major oil producing countries (namely the GCC - Gulf Corporation Council - countries). The effects of oil shocks and expansionary fiscal policy on the business cycle of oil producing countries are examined. The possibility to distinguish between various components of public sector spending policy (that is, purchases of consumption goods, investments in productive activities and compensation for public employees) is, in particular, allowed for. A real business cycle (RBC) model is calibrated to fit the data on an “average” oil producing country. Results from the simulation of the theoretical model suggest that the possibility that crowding-out effects of public over private investments can explain a large fraction of the negative effects of shocks to oil revenues on the private sector of the economy. In addition, since the growth in size of the public sector is unable to compensate for the reduction in size of the private sector, an increase in oil revenues has the effect to decrease total output. An expansionary fiscal policy is argued to have significant positive effects on private investments, employment and overall production. On the contrary, a shock to government consumption expenditure impacts negatively the level of public investment. As employment in the public sector increases significantly, public output responds positively to a shock in government consumption expenditure. Finally, an instantaneous negative effect on total investments and on the stock of capital in the economy is predicted. However, driven by the increase of the number of employees in the economy, total output expands.Oil Shocks, Dutch Disease, Resource Curse and Real Business Cycle Modelling

Coal industry in the context of Ukraine economic security

Purpose. To rate the main factors and indicators of the national economic security, in particular the degree of the country’s provision with primary natural resources which determine the global energy consumption trends. Methods. Analysis of components comprising the fuel and energy complex of Ukraine in view of survivability and heuristic algorithm for finding economically feasible reserves. The problem of finding the optimal flow distribution is solved by graphs. Findings. Emergencies are ranked in the descending order of optimal flows in the normal mode, the sorting sequence is defined, which results in the optimal solution via a minimum number of the algorithm computational steps. Originality. A universal algorithm for the development of fuel and energy complex of Ukraine has been designed. Practical implications. It was found that the vitality of integrated energy systems can be defined as the property to resist a large scale external disturbance, maintaining the ability to operate with acceptable performance and backup indicators. When considering large energy systems, the levels of the industry reserve can be reduced due to interchangeability of energy resources.Мета. Оцінити головні чинники та індикатори національної економічної безпеки, зокрема ступеня забезпеченості країни основними природними ресурсами, які зумовлюють тенденції світового енергоспоживання. Методика. Проведено аналіз елементів паливно-енергетичного комплексу України з урахуванням живучості та евристичний алгоритм знаходження економічно обґрунтованого резерву. Завдання знаходження оптимального потокорозподілення вирішене методом графів. Результати. Проранжовані аварійні ситуації у порядку зменшення величини оптимальних потоків у нормальному режимі, визначено послідовність перебору, що призводить за мінімальне число кроків обчислювального алгоритму до оптимального рішення. Наукова новизна. Розроблено універсальний алгоритм розвитку паливно-енергетичного комплексу України. Практична значимість. Встановлено, що живучість інтегрованих систем енергетики можна визначити як властивість протистояти великомасштабним зовнішнім обуренням, зберігаючи здатність функціонувати із допустимими показниками ефективності та резервування. При розгляді суттєвих енергетичних систем рівні галузевого резерву можуть знижуватися за рахунок взаємозамінності енергетичних ресурсів.Цель. Оценить главные факторы и индикаторы национальной экономической безопасности, в частности степени обеспеченности страны основными природными ресурсами, обуславливающими тенденции мирового энергопотребления. Методика. Произведен анализ элементов топливно-энергетического комплекса Украины с учетом живучести и эвристический алгоритм нахождения экономически обоснованного резерва. Задача нахождения оптимального потокораспределения решена методом графов. Результаты. Проранжированы аварийные ситуации в порядке убывания величины оптимальных потоков в нормальном режиме, определена последовательность перебора, что приводит за минимальное число шагов вычислительного алгоритма к оптимальному решению. Научная новизна. Разработан универсальный алгоритм развития топливно-энергетического комплекса Украины. Практическая значимость. Установлено, что живучесть интегрированных систем энергетики можно определить как свойство противостоять крупномасштабным внешним возмущением, сохраняя способность функционировать с допустимыми показателями эффективности и резервирования. При рассмотрении крупных энергетических систем уровни отраслевого резерва могут снижаться за счет взаимозаменяемости энергетических ресурсов.The authors express their gratitude to Laureate of National Prize of Ukraine, Doctor of Technical Sciences, Professor, Head of the Underground Mining Department, Volodymyr Bondarenko for his guidance while performing work on this topic

Are there oil currencies? The real exchange rate of oil exporting countries

This paper investigates whether the real oil price has an impact on the real exchange rates of three main oil-exporting countries: Norway, Russia and Saudi Arabia. We create our measure of the real effective exchange rates for Norway and Saudi Arabia (1980-2006) and for Russia (1995-2006), testing if real oil prices and productivity differentials against 15 OECD countries influence exchange rates. In the case of Russia it is possible to establish a positive long-run relationship between the real oil price and the real exchange rate. However, we find virtually no impact of the real oil price on the real exchange rates of Norway and Saudi Arabia. The diverse exchange rate regimes cannot help in explaining the different empirical results on the impact of oil prices across countries, which instead may be due to other policy responses, namely the accumulation of net foreign assets and their sterilisation, and specific institutional characteristics. JEL Classification: F31, C22oil exporting countries, Oil Price, purchasing power parity, real exchange rate, terms of trade

Oil price shocks: Demand vs Supply in a two-country model

From the last quarter of 2001 to the third quarter of 2005 the real price of oil increased by 103%. Such an increase is comparable to the one experienced during the oil shock of 1973. At the same time, the behaviour of real GDP growth, Consumer Price inflation (CPI inflation), GDP Deflator inflation, real wages and wage inflation in the U.S. in the 1970s was very different from the one exhibited in the 2000s. What can explain such a difference? Within a two-country framework where oil is used in production, two kinds of shocks are analyzed: (a) a reduction in oil supply, (b) a persistent increase in foreign productivity (as proxy for the experience of China in the last years). It is shown that, while the 1970s are consistent with a supply shock, the shock to foreign productivity generates dynamics close to the one observed in the 2000s.oil price, open economy, demand and supply shocks.

A Model for the Global Crude Oil Market Using a Multi-Pool MCP Approach

This paper proposes a partial equilibrium model to describe the global crude oil market. Pricing on the global crude oil market is strongly influenced by price indices such as WTI (USA) and Brent (Northwest Europe). Adapting an approach for pool-based electricity markets, the model captures the particularities of these benchmark price indices and their influence on the market of physical oil. This approach is compared to a model with bilateral trade relations as is traditionally used in models of energy markets. With these two model approaches, we compute the equilibrium solutions for several market power scenarios to investigate whether the multi-pool approach may be better suited than the bilateral trade model to describe the crude oil market. The pool-based approach yields, in general, results closer to observed quantities and prices, with the best fit obtained by the scenario of an OPEC oligopoly. We conclude that the price indices indeed are important on the global crude market in determining the prices and flows, and that OPEC effectively exerts market power, but in a non-cooperative way.crude oil, market structure, cartel, pool market, simulation model

Exhaustible Resources, Technology Choice and Industrialization of Developing Countries

How should the world economy adapt to the increased demand for exhaustible resources from countries like China and India? To address that issue, this paper presents a dynamic model of the world economy with two technologies for production; a resource technology which uses an exhaustible resource as an input and an alternative technology, which does not. I find that both the time path of resource extraction and the adoption of the alternative technology depend on the optimal allocation of capital across the technologies, and the size of the capital stock in relation to the resource stock. In particular, if the capital stock is small, only the resource technology is used initally, and the alternative technology is adopted with a delay. Next, the model is calibrated to analyze the e¤ects of industrialization of developing countries on the extraction of oil and technology choice for energy production. As a result of industrialization, resource extraction increases and the alternative technology is adopted earlier.Exhaustible resources; Technological change

Petroleum Profit Tax and Nigeria Economic Development

Petroleum Profit Tax is a major source of revenue for the Federal Government of Nigeria to meet its statutory obligations of ensuring the economic development of Nigeria. It assists the government to achieve the country’s macroeconomic objective in the areas of fiscal and monetary policies.However,it has been observed that non-provision of corporate social responsibilities in the communities where there is extraction of crude oil result into constant destruction of production installations, and hindrance to production; tax avoidance and evasion d poor tax administration, and weak fiscal policy have been negating the increase in tax income generated. The main objective of this paper is to assess the relationship between petroleum profit tax and economic development of Nigeria for the enhancement of the welfare of the citizens. Primary and secondary data were used to collect the research data, while chi-square and multiple regression statistical models were used to analyze the results of the field work. The findings reveal that there is a very strong relationship between petroleum profit tax and economic development of Nigeria, tax avoidance and evasion are major hindrance to income growth in this sector, poor tax administration is a problem to effectiveness and efficiency of this source of income, and lack of corporate social responsibilities is causing unrest in the crude oil production zone. The paper recommends the need for the government to make judicious use income generated for the benefits of Nigerians, and among others the need for tax reforms to address the issue of tax evasion and avoidance

ECONOMIC Potential of Renewable Energy in Vietnam's Power Sector

A bottom-up Integrated Resource Planning model is used to examine the economic potential of renewable energy in Vietnam’s power sector. In a baseline scenario without renewables, coal provides 44% of electricity generated from 2010 to 2030. The use of renewables could reduce that figure to 39%, as well as decrease the sector’s cumulative emission of CO2 by 8%, SO2 by 3%, and NOx by 4%. In addition,renewables could avoid installing 4.4GW in fossil fuel generating capacity, conserve domestic coal,decrease coal and gases imports, improving energy independence and security. Wind could become cost-competitive assuming high but plausible on fossil fuel prices, if the cost of the technology falls to 900 US$/kW