Do Oil Windfalls Improve Living Standards? Evidence from Brazil

AEJ Applied: We use variation in oil output among Brazilian municipalities to investigate the effects of resource windfalls on government behavior. Oil-rich municipalities experience increases in revenues and report corresponding increases in spending on public goods and services. However, survey data and administrative records indicate that social transfers, public good provision, infrastructure, and household income increase less (if at all) than one might expect given the higher reported spending.

Global Imbalances and Petrodollars

The World Economy: Oil exporters have run large current account surpluses. We explore oil exporters’ role in the global imbalances debate. Current account dynamics are estimated for oil-exporting countries and the rest of the world. We find that fiscal policy has a much stronger effect on the current account of oil exporters than on current accounts of other countries. The current account adjustment of oil-exporting countries is also faster. Fiscal policy of oil exporters can have a significant and speedy impact on global imbalances. The impact via the adjustment of exchange rates might not be effective.

Imperfect climate policy unlikely to increase domestic emissions

VoxEU: By promising to reduce fossil fuel demand in the future, some claim that climate policies will induce supply side responses today; firms will pump out emissions now before demand restrictions tighten. However, this column argues that the ‘green paradox’ is a red herring. Evidence from US coal prices suggests that, in industrialised countries, there is little danger of an increase in domestic emissions in response to imperfect climate policies.

Future production from US shale or tight oil

James Hamilton on Econbrowser: I attended the American Geophysical Union meeting in San Francisco two weeks ago at which I heard a very interesting presentation by David Hughes of the Post Carbon Institute. He is more pessimistic about future production potential from U.S. shale gas and tight oil formations than some other analysts. Here I report some of the data on tight oil production that led to his conclusion.
A number of analysts have issued optimistic assessments of the future production potential of U.S. shale or tight oil. For example, the International Energy Agency recently predicted that the U.S. would be producing over 10 million barrels per day of oil and natural gas liquids by 2020 before resuming a gradual decline. Citigroup is even more optimistic...

Hughes argues that there are limits to the number of new wells that will plausibly be drilled each year and the number of available well locations. These factors make achieving the IEA or Citigroup objectives difficult and mean a much more rapid decline in the production rate after the peak is reached. For example, here are Hughes' calculations if the current drilling rate were maintained-- 1500 new wells per year leading to a tripling in the number of operating wells-- and if the EIA's estimate of remaining productive locations is accepted. By contrast, the Citigroup projection of a continuous plateau after reaching peak production would require tens of thousands more well locations than estimated to be available by the EIA...

Natural Resources and Persistent Political Institutions

Mimeo by Dana Andersen: Significant attention has been given to the negative relationship between natural resources and growth– the so-called “resource curse.” The recent literature points to institutions as the key variable in determining if natural resources will ultimately be a curse, treating institutions as exogenous. In this paper, I develop a model that examines the effect of natural resources and entrepreneurs on persistence of both de facto and de jure political institutions. Towards this end, I develop a two-sector model (natural resources and manufacturing), where entrepreneurs choose to specialize in one of the two sectors. If entrepreneur choose to specialize in natural resources, they invest in de facto political power in order to ascertain greater natural resource rents. De facto and de jure political institutions co-evolve as an equilibrium outcome of entrepreneurial specialization and investment in political power. This results in state dependence, or persistence, of political institutions. One necessary condition for overcoming persistence is strong democratic de jure political institutions. However, political institutions may persist despite strong democratic de jure political institutions due to the distribution of rents in the natural resource and manufacturing sectors.

Can Transparency Transform Mineral Wealth into Wellbeing?

Revenue Watch: This paper provides a critical assessment of the linkages between minerals governance and economic development in the Maghreb and Middle East. We attempt to disentangle four critical dimensions of resource governance in the region:
• The nexus between resource governance and economic development in the Maghreb
• The linkages between weak minerals governance and the Arab Spring
• The role of State Owned Enterprises in the minerals sector in engineering more systemic reforms.
• The challenges of strengthening natural resource funds governance to facilitate regionalization in the Maghreb
The paper relies on the Revenue Watch Index 20122 – a systematic initiative to compare the strengths and shortcomings of natural resource management in 58 countries- to assess minerals governance in the Maghreb and formulate policy options for reform.

Corruption and reduced oil production: An additional resource curse factor?

Energy Policy: Prominent contributions to the resource curse literature suggest weak governance and corruption are important factors behind the wide welfare variations observed among oil producing countries. How weak governance and corruption influence revenue management and expenditure decisions, as well as the possible welfare benefits derived from oil, are broadly discussed. How they impact upon volumes of oil produced has, however, attracted little attention. This paper combines a review of the resource curse and oil production literatures with findings from qualitative interviews with oil sector experts to appreciate the feasibility of connections between corruption and oil production below its potential. We make particular reference to environments where regulatory institutions or political accountability are weak and focus primarily on producer government and oil firm relations. Drawing on insights from geology, political science and economics, we suggest suboptimal production solutions can impact volumes of oil actually produced and create constraints on long term revenues for oil producing countries. We argue greater disclosure of information on oil production efficiency on a field-by-field and country-by-country basis will assist further investigation of the relationships between corruption and volumes of oil produced.