• Program -
  • Type KAPSARC journal article
  • Date 28 April 2020
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Abstract

We develop an analytical approach that offers insights into how governments can better manage an oil-revenue stabilization fund. The model maximizes the expected intertemporal utility of households and consists of decisions that are a function of the fund level and oil revenue. We apply our approach to Saudi data, noting that the government deposits and reserve at the Saudi Arabian Monetary Agency have historically served as a buffer to decouple the Saudi government budget from oil revenue fluctuations. Results from our model match intuition: the larger the fund, the smaller the additions during periods of high revenues and the bigger the withdrawals during periods of low revenues. We also show that the fund can be partitioned into tranches with different asset durations rather than being solely invested in short-term assets. Our results indicate that the boundary between an oil-revenue stabilization fund and a sovereign wealth fund is not a bright line.

https://www.sciencedirect.com/science/article/pii/S0301420719304258?via%3Dihub

Science Direct

Authors

Nader AlKathiri

Principal Fellow- Energy Macro & Microeconomics Nader AlKathiri is a principal fellow in the Energy Macro & Microeconomics program. He currently leads a project exploring how…

Nader AlKathiri is a principal fellow in the Energy Macro & Microeconomics program. He currently leads a project exploring how different energy transition pathways impact the economies of developing and developed countries, aiming to enhance our understanding of the challenges and opportunities that lie ahead in achieving net-zero emissions. Nader’s research has been published in several international peer-reviewed journals such as Energy Economics, Resources Policy, and Applied Economics. Nader holds a Ph.D. in Economics from the University of Sussex and an M.Sc. in Applied Mathematics and Computational Sciences from KAUST. He also holds an MBA in Finance from Prince Sultan University and a B.Sc. degree in Operations Research from King Saud University.

Expertise

  • Energy Economics; Economic Diversification; Macroeconomics; Development Economics; Energy Transition

Publications See all Nader AlKathiri’s publications

Tarek Atalla

Tarek Atalla

Former Research Associate

Frederic Murphy

Frederic Murphy

Visiting Researcher Frederic is professor emeritus, Fox School of Business, Temple University, where he taught for 30 years. He was a visiting…

Frederic is professor emeritus, Fox School of Business, Temple University, where he taught for 30 years. He was a visiting researcher fellow at KAPSARC where he is participating in the development of energy models and writing policy analyses in a range of areas, including domestic energy use in Saudi Arabia, market power in world oil markets, designing and managing income stabilization funds, and China's and India's energy economies. He works mainly in the area of energy-market forecasting and energy policy analysis.

Prior to joining Temple, he was at the Energy Information Administration (EIA) of the U.S. Department of Energy and its predecessor, the Federal Energy Administration, where he headed the group that did the economic impact analyses of the bills and laws passed during the Carter administration and developed and ran the forecasting models then used for policy analyses and the forecasts in the EIA Annual Report. He has authored over 100 refereed articles. In one study he was ranked in the 20 most published researchers in his field over a fifty-year span. He was the editor in chief of the journal Interfaces, an area editor for Operations Research, and the Informs Journal on computing, and the Vice President of Publications for INFORMS and its predecessor society, Operations Research Society of America. He has been involved in studying local economic policy issues, including advising the Tax Reform Commission of the City of Philadelphia, estimating the impact on jobs of building casinos in Philadelphia, and political redistricting. He also did a queueing study oil tank vessels on the Delaware River.

Axel Pierru

Vice President, Knowledge & Analysis Axel Pierru was appointed Vice President of Knowledge and Analysis by the Board of Trustees of KAPSARC in December 2023.…

Axel Pierru was appointed Vice President of Knowledge and Analysis by the Board of Trustees of KAPSARC in December 2023. In this role, he oversees and provides thought leadership to KAPSARC’s research and analysis activities.

He joined KAPSARC in 2011, after spending 15 years at IFP Energies Nouvelles in France where he led research and consulting projects and taught energy economics and finance to postgraduate students. He has served in various leadership roles at KAPSARC, including serving as interim Vice President for Research. From 2014 to 2023 he was a program director, leading the Energy Systems & Modeling, Energy & Macroeconomics, and Energy Macro & Micro-Economics research programs.

Dr. Pierru earned his Ph.D. in economics from University Paris 1 Pantheon-Sorbonne (France). He also holds an HDR degree, which is a French accreditation to supervise research. In 2007, Dr. Pierru was awarded Chevalier dans l’Ordre des Palmes Académiques (knighthood award in the academic field) by the French Ministry for National Education. He is an editor of The Energy Journal, as well as the corecipient of the 2023 OPEC Award for the Best Energy Research Paper, a first-time honor from OPEC.

He leads the Knowledge & Analysis team in designing applied research that blends methodological innovation with practical significance for policymaking. His expertise covers energy economics, policy and finance, the oil market, energy transitions, and commodity-exporting economies.

Dr. Pierru has a proven track record of methodological innovations with over 50 journal papers to his name. He has been a key contributor to developing new research avenues, such as the role of OPEC in stabilizing the oil market, the economic modeling of price controls, or the evaluation of investment projects by international oil companies facing various tax systems.

He also coauthored with Denis Babusiaux the book Corporate Investment Decisions and Economic Analysis: Exercises and Case Studies (2005), a culmination of years of teaching, consulting, and research.

Expertise

  • Energy modelling
  • Energy economics
  • Energy policy
  • Oil pricing and finance

Publications See all Axel Pierru’s publications

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