Modeling the Response to Exogenous Shocks: The Capital Uplift Rate in Petroleum Taxation

37 Pages Posted: 16 Nov 2017 Last revised: 30 Oct 2018

See all articles by Magnus Berg

Magnus Berg

Arctic Securities

Øyvind Bøhren

BI Norwegian Business School

Erik Vassnes

Norwegian Ministry of Finance

Date Written: December 20, 2017

Abstract

We show how a recent drop in the Norwegian capital uplift rate by two percentage points changes optimal field design and reduces field value for shareholders. Although optimal design changes considerably and value drops by 12%, the ability to reoptimize design after the shock is worth only 1.5% of field value. This evidence suggests that large behavioral effects of a shock do not necessarily imply large value effects, making it less important to always account for the taxpayers’ response. The valuation error in such cases may be moderate if one instead uses the simplifying and widespread assumption of unresponsive taxpayers.

Keywords: endogeneity, responsive, unresponsive, tax shock, exogenous, petroleum taxation, uplift

JEL Classification: G31, H32

Suggested Citation

Berg, Magnus and Bøhren, Øyvind and Vassnes, Erik, Modeling the Response to Exogenous Shocks: The Capital Uplift Rate in Petroleum Taxation (December 20, 2017). Energy Economics 69, 2018, 1807-1840.. Available at SSRN: https://ssrn.com/abstract=3070015 or http://dx.doi.org/10.2139/ssrn.3070015

Magnus Berg

Arctic Securities ( email )

Haakon VIIs gate 5
Oslo, 0161
Norway

Øyvind Bøhren (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
46410503 (Phone)

Erik Vassnes

Norwegian Ministry of Finance ( email )

P.O. Box 8008 Dep
Oslo, 0030
Norway

Register to save articles to
your library

Register

Paper statistics

Downloads
70
rank
318,041
Abstract Views
536
PlumX Metrics