Optimal oil extraction, exploration, and investment in an underdeveloped oil-exporting country: the Saudi case

Thesis/Dissertation · Tue Jan 01 04:00:00 EST 1985

OSTI ID:6067760

Kaud, N I

Interaction between the oil and non-oil sectors in an economy has been largely overlooked in the literature. This thesis endogenizes the rate of oil extraction and considers the resource as a direct contributor to consumption and investment. The author's model incorporates the theory of nonrenewable resources into the neoclassical growth model and assumes that the objective is to maximize over time the social welfare of the representative individual, subject to constraints of income and of oil stock. Consumption, domestic investment and extraction rate are determined simultaneously. Sensitivity analysis within the simulated model confirms theoretical predictions of intersectoral effects. The ratio of capital to consumption is affected by changes in the preference and non-oil production function parameters. Resultant effects on the marginal productivity of capital in turn influence the extraction path. Changes in demand parameters affect the path of extraction directly and of consumption and capital indirectly. Changes in the demand function specification affect the rate of oil extraction, which declines in each case, but at a different rate.

• Research Organization: Washington Univ., Seattle (USA)
• OSTI ID: 6067760
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020200* -- Petroleum-- Reserves
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& Exploration
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29 ENERGY PLANNING, POLICY, AND ECONOMY
294002 -- Energy Planning & Policy-- Petroleum
ASIA
EXPLORATION
INDUSTRY
INVESTMENT
OPTIMIZATION
PETROLEUM INDUSTRY
PRODUCTION
SAUDI ARABIA