| ID | 111381 |
| Title Proper | Tax policy can change the production path |
| Other Title Information | a model of optimal oil extraction in Alaska |
| Language | ENG |
| Author | Leighty, Wayne ; Lin, C Y Cynthia |
| Publication | 2012. |
| Summary / Abstract (Note) | We model the economically optimal dynamic oil production decisions for seven production units (fields) on Alaska's North Slope. We use adjustment cost and discount rate to calibrate the model against historical production data, and use the calibrated model to simulate the impact of tax policy on production rate. We construct field-specific cost functions from average cost data and an estimated inverse production function, which incorporates engineering aspects of oil production into our economic modeling. Producers appear to have approximated dynamic optimality. Consistent with prior research, we find that changing the tax rate alone does not change the economically optimal oil production path, except for marginal fields that may cease production. Contrary to prior research, we find that the structure of tax policy can be designed to affect the economically optimal production path, but at a cost in net social benefit. |
| `In' analytical Note | Energy Policy Vol. 41; Feb 2012: p.759-774 |
| Journal Source | Energy Policy Vol. 41; Feb 2012: p.759-774 |
| Key Words | Oil Production ; Taxation ; Alaska |