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Aggressive Oil Extraction and precautionary Saving: Coping with Volatility.

Abstract:

The effects of stochastic future oil prices on optimal oil extraction paths and optimal tax, spending and government debt policies are analyzed when demand for oil is linear and preferences quadratic. Without prudence, optimal oil extraction is governed by the Hotelling rule and optimal budgetary policies by the tax smoothing principle. With prudence, the government depletes oil reserves more aggressively and engages in precautionary saving financed by postponing spending and bringing taxes f...

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Publisher:
OxCarre
Series:
Research Papers
Publication date:
2009-04-01
Language:
English
UUID:
uuid:6ae01a1e-7e49-4a83-8da6-2de176e19f2d
Local pid:
oai:economics.ouls.ox.ac.uk:12958
Deposit date:
2011-08-16

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