Managing Oil Price Volatility: Bringing Latin America’s Lessons to the Pacific

It is well understood that climate change poses specific dangers for small island developing states. Less commented on is another threat: the vulnerability of these states to the repercussions of energy insecurity.

Read more on the World Bank blog.

US to clarify rules on oil, mining payments abroad

(Reuters) - Two years of uncertainty for big US-listed mining and energy companies will end on Wednesday (22 August 2012) when US regulators finalize new rules on overseas operations, one set that will require the disclosure of payments to foreign governments while the other seeks to halt the flow of so-called "conflict minerals."

Read more here.

Norway’s nest egg

Oslo’s oil fund is seen as a paragon of responsible use of energy income but debate rages about its strategy. 

Read more from the FT's recent analysis here.

Diversification in Resource-Dependent Countries

Economic diversification is vital to countries' long-term economic growth, but many resource-rich nations fail to expand their sources of income beyond oil, gas and mining.

Economies heavily dependent on natural resources can face serious challenges in sustaining growth because of swings in prices for those resources. The need for diverse sources of income goes beyond fluctuating prices. Being rich in natural resources can hurt macroeconomic stability, crowd out domestic industry such as the manufacturing sector, increase the likelihood of civil unrest and undermine democratic institutions.

Read more of this report by Revenue Watch.

How not to manage a boom

QUICK: which country is the world’s third-biggest producer of oil? The answer (this is the Lexington column, after all) is the United States.
Read more of Lexington's column in this week's Economist.

From Resource Curse to Blessing

Joe Stiglitz writes on Project Syndicate:

New discoveries of natural resources in several African countries – including Ghana, Uganda, Tanzania, and Mozambique – raise an important question: Will these windfalls be a blessing that brings prosperity and hope, or a political and economic curse, as has been the case in so many countries? 

Read it all here.

Breakthrough Renewables and the Green Paradox

New OxCarre paper by Rick van der Ploeg:
We show how a monopolistic owner of oil reserves responds to a carbon-free substitute becoming available at some uncertain point in the future if demand is isoelastic and variable extraction costs are zero but upfront exploration investment costs have to be made. Not the arrival of this substitute matters for efficiency, but the uncertainty about the timing of this substitute coming on stream. Before the carbon-free substitute comes on stream, oil reserves are depleted too rapidly; as soon as the substitute has arrived, the oil depletion rate drops and the oil price jumps up by a discrete amount. Subsidizing green R&D to speed up the introduction of breakthrough renewables leads to more rapid oil extraction before the breakthrough, but more oil is left in situ as exploration investment will be lower. The latter offsets the Green Paradox.