Optimal pricing and production of an exhaustible resource: the case of Saudi Arabian crude oil

Thesis/Dissertation · Sat Jan 01 04:00:00 EST 1983

OSTI ID:6037754

Gaynor, W M

It is hypothesized in this paper that cartel members, such as Saudi Arabia, are maximizing the utility of diversified income streams that include not only oil-based revenues, but also yields to non-oil sector domestic capital investment and yields to foreign held assets. Optimization of such a utility function with respect to the resource stock constraint produces optimal prices and output paths that are well defined, regardless of price-inelastic demand, and permits a straightforward application to prediction of prices and outputs with alternative projections of GDP growth and export unit value inflation. The results of the forecast simulations indicate that substantial benefits to oil consuming countries, in terms of oil prices and export availability, would accrue if prices of non-oil goods in trade to oil exporters were stabilized. Policies of oil importers would improve oil availability and reduce costs to importers. Likewise, policies to improve the yield of foreign assets owned by the oil exporters would have favorable effects on cost and availability to importers. Neither of these effects, however, is as substantial as those associated with price stabilization.

• OSTI ID: 6037754
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
290400 -- Energy Planning & Policy-- Energy Resources
294002 -- Energy Planning & Policy-- Petroleum
ASIA
ENERGY SOURCES
FOSSIL FUELS
FUELS
OIL-EXPORTING COUNTRIES
OIL-IMPORTING COUNTRIES
OPTIMIZATION
PETROLEUM
PRICES
PRODUCTION
SAUDI ARABIA