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F Gori - One of the best experts on this subject based on the ideXlab platform.
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a new theory to forecast the price of nonrenewable energy resources with mass and energy capital conservation equations
International Scholarly Research Notices, 2014Co-Authors: F GoriAbstract:The mass and energy-capital conservation equations are employed to study the time evolution of mass and price of nonrenewable energy resources, extracted and sold to the market, in case of no-accumulation and no-depletion, that is, when the resources are extracted and sold to the market at the same mass flow rate. The Hotelling Rule for nonrenewable resources, that is, an exponential increase of the price at the rate of the current interest multiplied the time, is shown to be a special case of the general energy-capital conservation equation when the mass flow rate of extracted resources is unity. The mass and energy-capital conservation equations are solved jointly to investigate the time evolution of the extracted resources.
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Review Article A New Theory to Forecast the Price of Nonrenewable Energy Resources with Mass and Energy-Capital Conservation Equations
2014Co-Authors: F GoriAbstract:permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The mass and energy-capital conservation equations are employed to study the time evolution of mass and price of nonrenewable energy resources, extracted and sold to the market, in case of no-accumulation and no-depletion, that is, when the resources are extracted and sold to the market at the same mass flow rate. The Hotelling Rule for nonrenewable resources, that is, an exponential increase of the price at the rate of the current interest multiplied the time, is shown to be a special case of the general energy-capital conservation equation when the mass flow rate of extracted resources is unity.Themass and energy-capital conservation equations are solved jointly to investigate the time evolution of the extracted resources. 1
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mass and energy capital conservation equations to study the price evolution of non renewable energy resources part i generalization of the Hotelling Rule
Applied Thermal Engineering, 2006Co-Authors: F GoriAbstract:Abstract Mass conservation equation of non-renewable resources is employed to study the resources remaining in the reservoir according to the extraction policy. The energy conservation equation is transformed into an energy-capital conservation equation. The Hotelling Rule is shown to be a special case of the general energy-capital conservation equation when the mass flow rate of extracted resources is equal to unity. Mass and energy-capital conservation equations are then coupled and solved together. It is investigated the price evolution of extracted resources. The conclusion of the Hotelling Rule for non-extracted resources, i.e. an exponential increase of the price of non-renewable resources at the rate of current interest, is then generalized. A new parameter, called “Price Increase Factor”, PIF, is introduced as the difference between the current interest rate of capital and the mass flow rate of extraction of non-renewable resources. The price of extracted resources can increase exponentially only if PIF is greater than zero or if the mass flow rate of extraction is lower than the current interest rate of capital. The price is constant if PIF is zero or if the mass flow rate of extraction is equal to the current interest rate. The price is decreasing with time if PIF is smaller than zero or if the mass flow rate of extraction is higher than the current interest rate.
Ploeg, Frederick Van Der - One of the best experts on this subject based on the ideXlab platform.
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Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights: A Puzzle.
'Springer Fachmedien Wiesbaden GmbH', 2011Co-Authors: Ploeg, Frederick Van DerAbstract:For a country fractionalized in competing factions, each owning part of the stock of natural exhaustible resources, or with insecure property rights, we analyze how resources are transformed into productive capital to sustain consumption. We allow property rights to improve as the country transforms natural resources into capital. The ensuing power struggle about the control of resources is solved as a non-cooperative differential game. Prices of resources and depletion increase faster than suggested by the Hotelling Rule, especially with many competing factions and less secure property rights. As a result, the country substitutes away from resources to capital too rapidly and invests more than predicted by the Hartwick Rule. The power struggle boosts output but depresses aggregate consumption and welfare, especially in highly fractionalized countries with less secure property rights. Genuine saving evaluated with welfare-based accounting prices is zero in this game, but biased upwards if calculated with the lower market prices
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Rapacious Resource Depletion, Excessive Investment and Insecure Property Rights.
OxCarre, 2009Co-Authors: Ploeg, Frederick Van DerAbstract:For a country fractionalized in competing factions, each owning part of the stock of natural exhaustible resources, or with insecure property rights, we analyze how resources are transformed into productive capital to sustain consumption. We allow property rights to improve as the country transforms natural resources into capital. The ensuing power struggle about the control of resources is solved as a non-cooperative differential game. Prices of resources and depletion increase faster than suggested by the Hotelling Rule, especially with many competing factions and less secure property rights. As a result, the country substitutes away from resources to capital too rapidly and invests more than predicted by the Hartwick Rule. The power struggle boosts output but depresses aggregate consumption and welfare, especially in highly fractionalized countries with less secure property rights. Genuine saving evaluated with welfare-based accounting prices is zero in this game, but biased upwards if calculated with the lower market prices
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Aggressive Oil Extraction and precautionary Saving: Coping with Volatility.
OxCarre, 2009Co-Authors: Ploeg, Frederick Van DerAbstract: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 forward, especially if it has substantial monopoly power on the oil market, gives high priority to the public spending target and is very prudent, and future oil demand has high variance. If the oil market is fairly competitive, prudent governments deliberately under‐estimate oil reserves and under‐predict future oil prices. This leads to less aggressive oil depletion and less government saving. However, if the government attaches high priority to raising public spending to its bliss level, prudence implies a tendency to over‐predict future oil prices and reserves which induces more aggressive oil depletion and more government saving. Uncertain economic prospects induce precautionary saving and more aggressive oil extraction
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Voracious Transformation of a Common Natural Resource into Productive Capita.
OxCarre, 2008Co-Authors: Ploeg, Frederick Van DerAbstract:We analyze a power struggle about the control of natural resources where competing factions in society have a private stock of financial assets and a common stock of natural resources with inadequately defined private property rights. We solve a dynamic common-pool problem and obtain political economy variants of the Hotelling Rule for resource depletion and the Hartwick saving Rule necessary to sustain constant consumption in an economy with exhaustible natural resources. The rate of increase in the price of natural resources and resource depletion are faster than demanded by the Hotelling Rule. As a result, the country substitutes away from resources to capital too rapidly so that it saves and invests more than a homogenous society. The power struggle boosts output, but depresses aggregate consumption and social welfare. Genuine saving is nevertheless zero in a fractionalized society, since the too rapid depletion of natural resources is exactly in line with the too rapid accumulation of physical capital. World Bank measures of genuine saving are likely to be over-estimated. This exacerbates the puzzle of why many resource-rich countries experience negative genuine saving rates
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Challenges And Opportunities For Resource Rich Economies.
OxCarre, 2008Co-Authors: Ploeg, Frederick Van DerAbstract:The political economy of resource rich countries is surveyed. The empirical evidence suggests that countries with a large share of primary exports in GNP have bad growth records and high inequality, especially if the quality of institutions and the Rule of law are bad. The economic argument that a resource bonanza induces appreciation of the real exchange rate and a decline of non-resource export sectors may have some relevance. More important, a resource boom reinforces rent grabbing, especially if institutions are bad, and keeps in place bad policies. Optimal resource management may make use of the Hotelling Rule and the Hartwick Rule. However, a recent World Bank study suggests that resource rich economies squander their natural resource wealth and more often have negative genuine saving rates. Still, countries such as Botswana, Canada, Australia and Norway suggest it is possible to escape the resource curse. Some practical suggestions for a better management of natural resources are offered
Xianqiang Zhang - One of the best experts on this subject based on the ideXlab platform.
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a test of the Hotelling Rule using old growth timber data
Social Science Research Network, 2006Co-Authors: John Livernois, Henry Thille, Xianqiang ZhangAbstract:The paper tests Hotelling's prediction that scarcity rent for a nonrenewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old-growth timber, a resource that is effectively nonrenewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling Rule that we derive is not rejected in several of our specifications.
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a test of the Hotelling Rule using old growth timber data
Research Papers in Economics, 2003Co-Authors: John Livernois, Henry Thille, Xianqiang ZhangAbstract:. The paper tests Hotelling's prediction that scarcity rent for a non‐renewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old‐growth timber, a resource that is effectively non‐renewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling Rule that we derive is not rejected in several of our specifications. Un test de la regle d’Hotelling a l’aide de donnees pour du bois en provenance de forets anciennes. Ce memoire met au test la prediction d’Hotelling a savoir que la rente de rarete pour une ressource non renouvelable va croitre au rythme du taux d’escompte dans un equilibre de marche. On fait ce test a l’aide de donnees pour le bois en provenance de forets anciennes, une ressource qui est a toutes fins utiles non renouvelable. Contrairement a ce que suggerent certaines etudes anterieures, une mesure de la rente de rarete est directement observable dans la valeur marchande du bois sur pied qui emerge des encheres de bois. On construit un modele qui ouvre a la possibilite de reforestation et s’arrime au cadre institutionnel du marche du bois dans l’ouest des Etats‐Unis. La regle modifiee d’Hotelling que les auteurs derivent n’est pas rejetee dans plusieurs des specifications du modele (This abstract was borrowed from another version of this item.)
Van Der Ploeg R - One of the best experts on this subject based on the ideXlab platform.
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Guidelines for exploiting natural resource wealth
2014Co-Authors: Van Der Ploeg RAbstract:The principles of how best to manage the various components of national wealth are outlined, where the permanent income hypothesis, the Hotelling Rule, and the Hartwick Rule play a prominent role. As far as managing natural resource wealth is concerned, a case is made to use an intergenerational sovereign wealth fund to smooth consumption across generations, a liquidity fund for the precautionary buffers to deal with commodity price volatility, and an investment fund to park part of the windfall until the country is ready to absorb extra spending on domestic investment. Capital scarcity implies that a positive part of the windfall should be spent on domestic investment. The conclusions highlight the political economy problems that will have to be tackled with these normative proposals for managing wealth. © The Author 2014. Published by Oxford University Press
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The elephant in the ground: managing oil and sovereign wealth
'Blavatnik School of Government University of Oxford', 2013Co-Authors: Van Den Bremer T, Van Der Ploeg RAbstract:One of the most important developments in international finance and resource economics in the past twenty years is the rapid and widespread emergence of the $6 trillion sovereign wealth fund industry. Oil exporters typically ignore below-ground assets when allocating these funds, and ignore above-ground assets when extracting oil. We present a unified stylized framework for considering both. Subsoil oil should alter a fund's portfolio through additional leverage and hedging. First-best spending should be a share of total wealth, and any unhedgeable volatility must be managed by precautionary savings. If oil prices are pro-cyclical, oil should be extracted faster than the Hotelling Rule to generate a risk premium on oil wealth. Finally, we discuss how our analysis could improve the management of Norway's fund in practice
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Voracious transformation of a common natural resource into productive capital
'Blavatnik School of Government University of Oxford', 2008Co-Authors: Van Der Ploeg RAbstract:We analyze a power struggle about the control of natural resources where competing factions in society have a private stock of financial assets and a common stock of natural resources with inadequately defined private property rights. We solve a dynamic common-pool problem and obtain political economy variants of the Hotelling Rule for resource depletion and the Hartwick saving Rule necessary to sustain constant consumption in an economy with exhaustible natural resources. The rate of increase in the price of natural resources and resource depletion are faster than demanded by the Hotelling Rule. As a result, the country substitutes away from resources to capital too rapidly so that it saves and invests more than a homogenous society. The power struggle boosts output, but depresses aggregate consumption and social welfare. Genuine saving is nevertheless zero in a fractionalized society, since the too rapid depletion of natural resources is exactly in line with the too rapid accumulation of physical capital. World Bank measures of genuine saving are likely to be over-estimated. This exacerbates the puzzle of why many resource-rich countries experience negative genuine saving rates
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Why do many resource-rich countries have negative genuine saving? Anticipation of better times for rapacious rent seeking
'Blavatnik School of Government University of Oxford', 2008Co-Authors: Van Der Ploeg RAbstract:We investigate the Hartwick Rule for saving of a nation necessary to sustain a constant level of private consumption for a small open economy with an exhaustible stock of natural resources. The amount by which a country saves and invests less than the marginal resource rents equals the expected capital gains on reserves of natural resources plus the expected increase in interest income on net foreign assets plus the expected fall in the cost of resource extraction due to expected improvements in extraction technology. Effectively, depletion is then postponed until better times. This suggests that it is not necessarily sub-optimal for resource-rich countries to have negative genuine saving. However, in countries with different groups with imperfectly defined property rights on natural resources, political distortions induce faster resource depletion than suggested by the Hotelling Rule. Fractionalised societies with imperfect property rights build up more foreign assets than their marginal resource rents, but in the long run accumulate less foreign assets than homogenous societies. Hence, such societies end up with lower sustainable consumption and are worse off, especially if seepage is strong, the number of rival groups is large and the country does not enjoy much monopoly power on the resource market. Genuine saving is zero in such societies. However, World Bank genuine saving figures based on market rather than accounting prices will be negative, albeit less so in more fractionalised societies with less secure property rights
John Livernois - One of the best experts on this subject based on the ideXlab platform.
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on the empirical significance of the Hotelling Rule
Review of Environmental Economics and Policy, 2008Co-Authors: John LivernoisAbstract:AbstractThe Hotelling Rule—that price net of marginal cost must rise at the rate of interest in nonrenewable resource markets—forms the theoretical core of the economics of nonrenewable resources. ...
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a test of the Hotelling Rule using old growth timber data
Social Science Research Network, 2006Co-Authors: John Livernois, Henry Thille, Xianqiang ZhangAbstract:The paper tests Hotelling's prediction that scarcity rent for a nonrenewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old-growth timber, a resource that is effectively nonrenewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling Rule that we derive is not rejected in several of our specifications.
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a test of the Hotelling Rule using old growth timber data
Research Papers in Economics, 2003Co-Authors: John Livernois, Henry Thille, Xianqiang ZhangAbstract:. The paper tests Hotelling's prediction that scarcity rent for a non‐renewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old‐growth timber, a resource that is effectively non‐renewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling Rule that we derive is not rejected in several of our specifications. Un test de la regle d’Hotelling a l’aide de donnees pour du bois en provenance de forets anciennes. Ce memoire met au test la prediction d’Hotelling a savoir que la rente de rarete pour une ressource non renouvelable va croitre au rythme du taux d’escompte dans un equilibre de marche. On fait ce test a l’aide de donnees pour le bois en provenance de forets anciennes, une ressource qui est a toutes fins utiles non renouvelable. Contrairement a ce que suggerent certaines etudes anterieures, une mesure de la rente de rarete est directement observable dans la valeur marchande du bois sur pied qui emerge des encheres de bois. On construit un modele qui ouvre a la possibilite de reforestation et s’arrime au cadre institutionnel du marche du bois dans l’ouest des Etats‐Unis. La regle modifiee d’Hotelling que les auteurs derivent n’est pas rejetee dans plusieurs des specifications du modele (This abstract was borrowed from another version of this item.)