Two essays on political economy of the oil industry

Abstract

This dissertation explores the impact of noncommercial objectives (over employment and subsidized domestic fuel price) on National Oil Companies (NOCs) and the common factors of the oil producing countries which own National Oil Companies. We study to specific situations. First. I develop a production, reinvestment (exploration and recovery) and dividend model to estimate the effects of over employment and domestic fuel subsidies on NOC's operational and ?nancial decisions. I find that over employment and domestic fuel subsidies dramatically reduce NOC's market value, production, and reinvestment, which represent the economic cost (shadow prices) and operational consequences of non-commercial objectives. Then. I study a database of 43 oil producing countries during the period 2004-2012 using a Logistic Panel Regression, in order to identify social-economic and governance common factors. The results show that oil-producing countries with relatively low economic development, limited public opinion voice, reduced accountability, and unclear regulation tend to own a NOC. Overall, this result suggests the hypothesis that politicians or leaders are more likely to address non-commercial objectives in countries with underdeveloped economies and low governance