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A parsimonious model of tax avoidance and distortions in petroleum exploration and development

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  • Smith, James L.

Abstract

We present a simple model of petroleum exploration and development that can be applied to study the performance of alternative tax systems and identify potential distortions. Although the model is highly simplified, it incorporates many factors and some of the key tradeoffs that would influence an investor's investment behavior. The model recognizes the role of enhanced oil recovery and treats the impact of taxation on exploration and development in an integrated manner consistent with an investor's joint optimization of investments at both stages of the process. The model is simple and user-friendly, which facilitates application to a broad range of problems.

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  • Smith, James L., 2014. "A parsimonious model of tax avoidance and distortions in petroleum exploration and development," Energy Economics, Elsevier, vol. 43(C), pages 140-157.
    • Handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:140-157
    DOI: 10.1016/j.eneco.2014.02.011
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    2. Jia-Yue Huang & Yun-Fei Cao & Hui-Ling Zhou & Hong Cao & Bao-Jun Tang & Nan Wang, 2018. "Optimal Investment Timing and Scale Choice of Overseas Oil Projects: A Real Option Approach," Energies, MDPI, vol. 11(11), pages 1-22, October.
    3. Berg, Magnus & Bøhren, Øyvind & Vassnes, Erik, 2018. "Modeling the response to exogenous shocks: The capital uplift rate in petroleum taxation," Energy Economics, Elsevier, vol. 69(C), pages 442-455.
    4. Beer, Sebastian & Loeprick, Jan, 2017. "Taxing income in the oil and gas sector — Challenges of international and domestic profit shifting," Energy Economics, Elsevier, vol. 61(C), pages 186-198.
    5. Banda, Webby, 2023. "A system dynamics model for assessing the impact of fiscal regimes on mining projects," Resources Policy, Elsevier, vol. 81(C).
    6. Cairns, Robert D., 2018. "Stranded oil of Erewhon," Energy Policy, Elsevier, vol. 121(C), pages 248-251.
    7. Hiorth, Aksel & Osmundsen, Petter, 2020. "Petroleum taxation. The effect on recovery rates," Energy Economics, Elsevier, vol. 87(C).
    8. Emmanuel E. Okoro & Lawrence U. Okoye & Ikechukwu S. Okafor & Tamunotonjo Obomanu & Ngozi Adeleye, 2021. "Impact of Production Sharing Contract Price Sliding Royalty: The case of Nigeria s Deepwater Operation," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 261-268.
    9. Petter Osmundsen, Magne Emhjellen, Thore Johnsen, Alexander Kemp and Christian Riis, 2015. "Petroleum Taxation Contingent on Counter-Factual Investment Behaviour," The Energy Journal, International Association for Energy Economics, vol. 0(Adelman S).

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    More about this item

    Keywords

    Petroleum exploration; Oil production; Taxation; Distortions;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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