• Initiative -
  • Type KAPSARC journal article
  • Date 22 February 2021
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Abstract

We develop a partial equilibrium framework to assess the opportunity cost of domestic oil consumption for an oil-exporting country. We show that the opportunity cost depends on various factors, including the constraints to which the oil producer is subject and the domestic oil pricing scheme. Moreover, through an application of the envelope theorem, we assess net welfare gains that can be generated from a reform of the domestic oil price. Our results show that the most efficient pricing policy is to set the domestic price equal to the opportunity cost. A numerical illustration for Saudi Arabia is provided to demonstrate the practical value of the proposed framework. Our findings can inform public decision-making for projects and policies that impact oil demand.

 

https://doi.org/10.1016/j.eneco.2021.105161

Science Direct

Authors

Fatih Karanfil

Research Fellow Fatih is a research fellow at KAPSARC.He received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris and his… Fatih is a research fellow at KAPSARC.He received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris and his M.A. in economic analysis and modeling jointly from the Pantheon-Sorbonne University and the École Centrale Paris. Before joining KAPSARC in December 2017, Fatih was a research fellow at EconomiX-CNRS and an associate professor of economics at the University of Paris, Nanterre, where he taught econometrics, energy economics, and environmental economics. Fatih's current research focuses mainly on developing economic frameworks to provide insights into energy policymaking in oil-producing countries. His research has been published in general-interest economics journals (e.g., Applied EconomicsJournal of Comparative Economics and Macroeconomic Dynamics), as well as journals on energy economics (e.g., Energy Economics, Energy PolicyandThe Energy Journal).

Expertise

  • Energy economics
  • Energy policy
  • Environmental and resource economics
  • Applied economics

Publications See all Fatih Karanfil’s publications

Axel Pierru

Program Director Axel is the director of KAPSARC’s Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC’s interim… Axel is the director of KAPSARC's Energy and Macroeconomics program. From October 2018 to March 2019, he was KAPSARC's interim vice president of research. Axel joined KAPSARC in 2011, after spending 15 years at IFP Energies Nouvelles in France, where he led research, consulting and training projects. Axel received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris. He undertakes applied research that combines methodological innovation with practical relevance for policymaking. His research is focused on energy economics, policy, finance, oil pricing, and energy-exporting economies. Axel has been published extensively, with over 40 peer-reviewed journal papers to his name.

Expertise

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

Publications See all Axel Pierru’s publications

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