The Welfare Implications of Oil Privatization: A Cost-Benefit Analysis of Norway's Statoil

Cambridge Working Paper in Economics No. 0907

EPRG Working Paper No. 0905

48 Pages Posted: 1 Sep 2008 Last revised: 26 Feb 2009

See all articles by Christian O. H. Wolf

Christian O. H. Wolf

University of Cambridge - Judge Business School

Michael G. Pollitt

University of Cambridge - Judge Business School

Date Written: January 27, 2009

Abstract

The oil industry is of great economic significance to many countries, and privatisations of National Oil Companies (NOCs) have often been controversial, as have been the benefits from privatisation more generally. We conduct a social cost-benefit analysis of the partial privatisation of Norway's Statoil and estimate net present welfare improvements of at least NOK 166 billion (US$18.4 billion) in 2001 money, which amounts to 11% of Norway's GDP in that year. Savings on investment costs are the most important source of efficiency improvements, and two thirds of the overall benefits accrue at fellow stakeholders in Statoil-led operations. The state manages to capture 66% of the total welfare gain, with the remainder going to private shareholders and no changes to consumer surplus. It is shown that benefits from partial privatisation can be substantial, particularly if ownership change is supported by additional restructuring measures, and that privatisation can be structured with state involvement at several levels, aiming to maximise the public share of benefits.

Keywords: Privatization, Cost-Benefit, Welfare, Oil and Gas, Norway

JEL Classification: D61, H43, L33, L71, Q48

Suggested Citation

Wolf, Christian O. H. and Pollitt, Michael G., The Welfare Implications of Oil Privatization: A Cost-Benefit Analysis of Norway's Statoil (January 27, 2009). EPRG Working Paper No. 0905; EPRG Working Paper No. 0905. Available at SSRN: https://ssrn.com/abstract=1260280 or http://dx.doi.org/10.2139/ssrn.1260280

Christian O. H. Wolf (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.jbs.cam.ac.uk

Michael G. Pollitt

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0) 1223 339615 (Phone)
+44 (0) 1223 339701 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
379
Abstract Views
1,608
rank
77,352
PlumX Metrics