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Monopolistic Recycling of Oil Revenue and Intertemporal Bias in Oil Depletion and Trade

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  • Arye L. Hillman
  • Ngo Van Long

Abstract

This paper investigates oil depletion and trade when monopolistic oil producers also exercise monopoly power in the capital market. A two-period model views collusively organized oil producers with an initial trade surplus and a subsequent deficit. When monopoly power in the capital market is applied to the disadvantage of borrowers, less oil is initially made available to oil importers than if the interest rate had been competitively determined. This depletion bias, however, is reversed if, because of incentives for capital accumulation, it is to the advantage of the oil producers to subsidize lending to the oil importers. In either case the bias in oil depletion due to monopolistic recycling of oil revenue is greater, the more vulnerable are oil importers' incomes to a curtailment of oil supplies.

Suggested Citation

  • Arye L. Hillman & Ngo Van Long, 1985. "Monopolistic Recycling of Oil Revenue and Intertemporal Bias in Oil Depletion and Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 597-624.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:3:p:597-624.
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    File URL: http://hdl.handle.net/10.2307/1884371
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    Cited by:

    1. Habla, Wolfgang, 2018. "Climate policy under factor mobility: A (differentiated) case for capital taxation," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 100-124.
    2. Marz, Waldemar & Pfeiffer, Johannes, 2023. "Fossil resource market power and capital markets," Energy Economics, Elsevier, vol. 117(C).
    3. Habla, Wolfgang, 2016. "The Green Paradox and Interjurisdictional Competition across Space and Time," Working Papers in Economics 668, University of Gothenburg, Department of Economics.
    4. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    5. Marz, Waldemar & Pfeiffer, Johannes, 2020. "Petrodollar recycling, oil monopoly, and carbon taxes," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    6. Waldemar Marz & Johannes Pfeiffer, 2015. "Resource Market Power and Levels of Knowledge in General Equilibrium," ifo Working Paper Series 197, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Waldemar Marz, 2019. "Complex dimensions of climate policy: the role of political economy, capital markets, and urban form," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 85.
    8. Marz, Waldemar & Pfeiffer, Johannes, 2016. "Oil Market Power in General Equilibrium," VfS Annual Conference 2016 (Augsburg): Demographic Change 145876, Verein für Socialpolitik / German Economic Association.

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