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The Economics of Oil and Gas
The availability of low-cost energy from fossil fuels – in particular oil – has been the driving force behind postwar global economic growth, such that the petroleum industry has some of the world’s largest companies. This book examines the economics of the oil and gas industry, from exploration, development and production, to transportation, refining and marketing. At each stage of the value chain, the key economic costs and considerations are presented in order to provide the reader with a comprehensive understanding of the workings of the industry.
The book examines some of the unique economic challenges the industry faces, including negotiating international contracts with host countries (to gain access to hydrocarbons), managing the risks of recovery, implementing cross-border pipelines, dealing with huge variations in the taxation of refined products, and reacting to the effect of price control and subsidization in the OPEC nations which can create massive volatility in pricing. The search for low-carbon fuels, the impact of shale gas, the prospect of finite reserves, and the global political realities of the competing demands of oil-importing and oil-exporting countries are shown to make the sector high risk, but the economic rewards can be huge.
The book examines some of the unique economic challenges the industry faces, including negotiating international contracts with host countries (to gain access to hydrocarbons), managing the risks of recovery, implementing cross-border pipelines, dealing with huge variations in the taxation of refined products, and reacting to the effect of price control and subsidization in the OPEC nations which can create massive volatility in pricing. The search for low-carbon fuels, the impact of shale gas, the prospect of finite reserves, and the global political realities of the competing demands of oil-importing and oil-exporting countries are shown to make the sector high risk, but the economic rewards can be huge.
- GenresEconomics
288 pages, Hardcover
Published December 5, 2019
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Displaying 1 - 2 of 2 reviews
February 24, 2022
I'm not an expert in this field, but this book seems to be a great supplementary reading to the Yergin's The Prize. I cannot recommend it to everyone, but if you are interested in this theme, this book definitely worth its time. Below are some takeaway points for myself:
Upstream and downstream oil and gas sectors are treated by different fiscal regimes. "Downstream oil and gas projects tend to be treated as general industrial projects and subject only to standard corporate income tax".
Regarding gasoline, diesel and other products prices they are mostly influenced by the price of crude oil (I know, this seems obvious). But the reason for this, is that the refineries, which produce these products are "[...] distributed more evenly across the world than the crude oil reserves and there are no organizations, like OPEC, that can cartelize the refiners [...]".
Though downstream products are treated within the general tax code, everyone if familiar with the taxation of the petroleum products, which can be more than 50% of the final product. Mu singles out the following 3 reasons:
"The first is that fuel tax effectively works as an import tariff. By raising the cost of driving, such taxes reduce the dependence on imported products, thereby enhancing energy security. Second, the fuel taxes penalize consumption, therefore inducing firms and consumers to internalize the externality, such as road congestion and traffic-related accidents. Last, fuel tax is also a way of raising funds for financing public infrastructure, such as railroads, highways and airports".
Upstream and downstream oil and gas sectors are treated by different fiscal regimes. "Downstream oil and gas projects tend to be treated as general industrial projects and subject only to standard corporate income tax".
Regarding gasoline, diesel and other products prices they are mostly influenced by the price of crude oil (I know, this seems obvious). But the reason for this, is that the refineries, which produce these products are "[...] distributed more evenly across the world than the crude oil reserves and there are no organizations, like OPEC, that can cartelize the refiners [...]".
Though downstream products are treated within the general tax code, everyone if familiar with the taxation of the petroleum products, which can be more than 50% of the final product. Mu singles out the following 3 reasons:
"The first is that fuel tax effectively works as an import tariff. By raising the cost of driving, such taxes reduce the dependence on imported products, thereby enhancing energy security. Second, the fuel taxes penalize consumption, therefore inducing firms and consumers to internalize the externality, such as road congestion and traffic-related accidents. Last, fuel tax is also a way of raising funds for financing public infrastructure, such as railroads, highways and airports".
July 22, 2025
It's pretty much a textbook. Gives useful context for how and what dictates prices and therefore the economics of various different participants
Displaying 1 - 2 of 2 reviews