nep-ene New Economics Papers
on Energy Economics
Issue of 2005‒10‒22
eleven papers chosen by
Roger Fouquet
Imperial College, UK

  1. Directional Congestion and Regime Switching in a Long Memory Model for Electricity Prices By Haldrup; Niels; Morten Oerregaard Nielsen
  2. A Simultaneous Equation Model for World Crude Oil and Natural Gas Markets By Noureddine Krichene
  3. In the Pipeline: Georgia's Oil and Gas Transit Revenues By Andreas Billmeier; Bert van Selm; Jonathan C. Dunn
  4. Les hydrocarbures russes : une industrie en quête de modèle By Catherine Locatelli
  5. Fiscal Surveillance in a Petro Zone: The Case of the CEMAC By Johannes Wiegand
  6. Subordinated Levy Processes and Applications to Crude Oil Options By Noureddine Krichene
  7. Are Developing Countries Better Off Spending their Oil Wealth Upfront? By H. Takizawa; E. H. Gardner; Kenichi Ueda
  8. Fiscal Sustainability in Heavily Indebted Countries Dependent on Nonrenewable Resources: The Case of Gabon By Joseph Ntamatungiro
  9. Distribution of Natural Resources, Entrepreneurship, and Economic Development: Growth Dynamics with Two Elites By Josef Falkinger; Volker Grossmann
  10. Commodity Price Shocks and the Odds on Fiscal Performance By Francis Y. Kumah; John Matovu
  11. John Bates Clark on Trusts: New Light from the Columbia Archives By Luca Fiorito; John F. Henry

  1. By: Haldrup; Niels; Morten Oerregaard Nielsen (Department of Economics, University of Aarhus, Denmark)
    Abstract: The functioning of electricity markets has experienced increasing complexity as a result of deregulation in recent years. Consequently this affects the multilateral price behaviour across regions with physical exchange of power. It has been documented elsewhere that features such aslong memory and regime switching reflecting congestion and non-congestion periods are empirically relevant and hence are features that need to be taken into account when modeling price behavior. In the present paper we further elaborate on the co-existence of long memory and regime switches by focusing on the effect that the direction of possible congestion episodes has on the price dynamics. Under non-congestion prices are identical. The direction of possible congestion is identified by the region with excess demand of power through the sign of price differences and hence three different states can be considered: Non-congestion and congestion periods with excess demand in the one or the other region. Using data from the Nordic power exchange, Nord Pool, we find that the price dynamics and long memory features of the price series generally are rather different across the different states. Also, there is evidence of fractional cointegration at some grid points when conditioning on the states.
    Keywords: Cointegration, electricity prices, forecasting, fractional integration and cointegration, long memory, Markov switching
    JEL: C2 C22 C32
    Date: 2005–10–17
  2. By: Noureddine Krichene
    Abstract: A model for world crude oil and natural gas markets is estimated. It confirms low price and high income elasticities of demand for both crude oil and natural gas, which explains the market power of oil producers and price volatility following shocks. The paper establishes a relationship between oil prices, changes in the nominal effective exchange rate (NEER) of the U.S. dollar, and the U.S. interest rates, thereby identifying demand shocks arising from monetary policy. Both interest rates and the NEER are shown to influence crude prices inversely. The results imply that crude oil prices should be included in the policy rule equation of an inflation targeting model.
    Keywords: Natural gas , Energy sector , Markets , Investment , Oil prices , Interest rates , Economic models ,
    Date: 2005–02–25
  3. By: Andreas Billmeier; Bert van Selm; Jonathan C. Dunn
    Abstract: Starting in 2005, nontax revenue in Georgia is expected to rise significantly, in the form of transit fees for oil transported through the Baku-Tbilisi-Ceyhan Oil Pipeline. Transit fees for gas transported through the South Caucasus Pipeline are expected to start in 2007. This paper discusses (1) how much additional revenue can be expected, (2) prospects for monetizing gas that could be received as in-kind transit fees, in the light of pervasive nonpayment in the domestic gas sector, (3) the impact of these inflows on external competitiveness, (4) how to put in place appropriate reporting on these additional revenues, and (5) whether these inflows justify the creation of a special natural resource fund.
    Keywords: Oil , Georgia , Natural gas , Transport , Revenues , Fiscal policy ,
    Date: 2004–11–12
  4. By: Catherine Locatelli (LEPII - Laboratoire d'économie de la production et de l'intégration internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: La politique énergétique de la Russie, producteur important de pétrole et de gaz, témoigne d'évolutions majeures notamment dans le domaine des hydrocarbures. La principale d'entre elles réside dans l'évolution du modèle organisationnel qui s'était progressivement mis en place lors des premières années de la transition.
    Keywords: politique énergétique;Russie;industrie pétrolière;industrie gazière;structure d\'organisation
    Date: 2005–10–07
  5. By: Johannes Wiegand
    Abstract: This paper discusses fiscal surveillance criteria for the countries of the Central African Monetary and Economic Union (CEMAC), most of which depend heavily on oil exports. At present, the CEMAC's macroeconomic surveillance exercise sets as fiscal target a floor on the basic budgetary balance. This appears inadequate, for at least two reasons. First, fluctuations in oil prices and, hence, oil receipts obscure the underlying fiscal stance. Second, oil resources are limited, which suggests that some of today's oil receipts should be saved to finance future consumption. The paper develops easy-to-calculate indicators that take both aspects into account. A retrospective analysis based on these alternative indicators reveals that in recent years, the CEMAC's surveillance exercise has tended to accommodate stances of fiscal policy that are at odds with sound management of oil wealth.
    Keywords: Fiscal policy , Oil , Monetary unions ,
    Date: 2004–02–03
  6. By: Noureddine Krichene
    Abstract: One approach to oil markets is to treat oil as an asset, besides its role as a commodity. Speculative and nonspeculative activity by investors in the derivatives markets could be responsible for a sizable increase in oil prices. This paper recognizes both the consumption and investment aspects of crude oil and proposes Levy processes for modeling uncertainty and options pricing. Calibration to crude oil futures' options shows high volatility of oil futures prices, fat-tailed, and right-skewed market expectations, implying a higher probability mass on crude oil prices remaining above the futures' level. These findings support the view that demand for futures contracts by investors could lead to excessively high price volatility.
    Date: 2005–09–14
  7. By: H. Takizawa; E. H. Gardner; Kenichi Ueda
    Abstract: We question the conventional view that it is optimal for government to maintain a stable level of spending out of oil wealth. We compare this conventional policy recommendation with one where government spends all of its oil revenues upfront, at the same rate as oil is extracted. Using a neoclassical growth model with positive external effects of public spending on consumption and productivity, we find that, if the economy is growing along the steady-state balanced path, the conventional view is validated. However, if the economy starts with a lower capital stock, the welfare ranking across two policies can be reversed.
    Keywords: Fiscal policy , Developing countries , Public investment , Oil revenues , Economic growth , Economic models ,
    Date: 2004–08–16
  8. By: Joseph Ntamatungiro
    Abstract: This paper proposes a framework for assessing fiscal sustainability in heavily indebted countries dependent on exhaustible resources, with reference to Gabon. It finds that fiscal sustainability could be achieved by: (i) developing a fiscal rule for the non-oil primary fiscal balance compatible with an objective for reducing the debt-to-non-oil GDP ratio; (ii) introducing a constant oil-based income transfer per capita allowing intergenerational equity; and (iii) building up an oil savings fund. Long-term simulations show that Gabon's fiscal position is fragile and that a fiscal policy path consistent with the proposed framework could help achieve comfortable levels of net wealth.
    Keywords: Fiscal policy , Gabon , Heavily indebted poor countries , Oil , Debt ,
    Date: 2004–03–04
  9. By: Josef Falkinger (University of Zurich, CESifo and IZA Bonn); Volker Grossmann (University of Zurich, CESifo and IZA Bonn)
    Abstract: This paper develops a model in which the interaction of entrepreneurial investments and power of the owners of land or other natural resources determines structural change and economic development. A more equal distribution of natural resources promotes structural change and growth through two channels: First, by weakening oligopsony power of owners and thereby easing entrepreneurial investments for credit-constrained individuals whose investment possibilities depend on their income earned in the primary goods sector. Second, by shifting the distribution of political power from resource owners towards the entrepreneurial elite, resulting in economic policy and institutions which are more conducive to entrepreneurship and productivity progress. We argue that these hypotheses are consistent with a large body of historical evidence from the Americas and with evidence on transition economies.
    Keywords: credit constraints, distribution, economic development, entrepreneurship, institutions, oligopsony power, political elites
    JEL: O10 H50
    Date: 2005–09
  10. By: Francis Y. Kumah; John Matovu
    Abstract: Unanticipated changes in commodity prices can generate significant movements in fiscal aggregates. This paper seeks to understand the dynamics of these fiscal movements in the context of transitory commodity price shocks using sample data from four CIS countries- two oil-producing and two non-oil commodity-intensive countries. It adopts a structural VAR approach and identifies the dynamic effects of commodity price shocks on fiscal performance under two broad tax regimes. Stochastic simulations indicate high probabilities of fiscal overperformance in the short term when commodity prices are high. These probabilities deteriorate significantly, however, in the long term after the transitory positive commodity price shock has dissipated, particularly when lax fiscal policy is adopted during the period of the price boom.
    Date: 2005–09–09
  11. By: Luca Fiorito; John F. Henry
    Abstract: The paper sheds new light on John Bates Clark’s mature position on the “trust” issue. Access to previously unpublished 1911 testimony before the Interstate Commerce Committee of the U.S. Senate, it is shown that, although Clark relied generally on competitive forces to keep monopoly power in check, following the Standard Oil and American Tobacco cases of that year, he lost considerable faith in the power of his concept of “potential competition,” or latent competition that may or may not be realized. What he advocates here is government promotion of actual competition, largely through the dissolution of the “perilous” trusts and the development of a common pricing policy where all producers face the same price regimes in both the output and input markets. What is desired as an outcome is the promotion of what Clark terms “tolerant competition.” Tolerant competition is not the perfect competition of the neoclassical model, nor the rough-andready competition of the pre-1870 era. Rather, it is a live-and-let-live form of competition where big firms and small firms face the same pricing conditions and only efficiency determines the profit outcome.
    JEL: B13 B31
    Date: 2005–09

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