Abstract

https://ssrn.com/abstract=2866367
 


 



Pro-Cyclical Petroleum Investments and Cost Overruns in Norway


Roy Endre Dahl


University of Stavanger

Sindre Lorentzen


University of Stavanger

Atle Oglend


University of Stavanger

Petter Osmundsen


University of Stavanger; CESifo (Center for Economic Studies and Ifo Institute)

September 27, 2016

CESifo Working Paper Series No. 6086

Abstract:     
Development projects in the oil industry often have cost overruns. Through analysis of data from Norwegian development projects in the petroleum industry, this paper investigates the common effect of business cycle developments on cost overruns. Lack of capacity and expertise in a tight supplier market yield cost inflation and difficulties in managing projects. Unlike previous analyses of cost overruns, we analyse projects over a long time period to capture the cyclical effects. We document a statistically significant positive relationship between oil price developments and cost overruns, with shocks or surprises to the oil price during the project implementation having a larger impact on cost overruns than the oil price level itself. Cost overrun ultimately leads to reduced competitiveness for the industry, and we discuss consequences and policy implications for business and society of these cost overruns.

Number of Pages in PDF File: 30

Keywords: cost overruns, petroleum projects, business cycle, oil price

JEL Classification: D220, D240, G310


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Date posted: November 9, 2016  

Suggested Citation

Dahl, Roy Endre and Lorentzen, Sindre and Oglend, Atle and Osmundsen, Petter, Pro-Cyclical Petroleum Investments and Cost Overruns in Norway (September 27, 2016). CESifo Working Paper Series No. 6086. Available at SSRN: https://ssrn.com/abstract=2866367

Contact Information

Roy Endre Dahl
University of Stavanger ( email )
PB 8002
Stavanger, 4036
Norway
Sindre Lorentzen
University of Stavanger ( email )
PB 8002
Stavanger, 4036
Norway
Atle Oglend (Contact Author)
University of Stavanger ( email )
PB 8002
Stavanger, 4036
Norway
Petter Osmundsen
University of Stavanger ( email )
4036 Stavanger
Norway
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany

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