Post on 04-Apr-2018
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Overview class Economics of Oil and Gas PHD Economics and Social Science
Macroeconomics of Rich Mineral Countries, with focus on Petro States part 1
Natural rich endowment societies have their own socio-economics dynamics andinstitutions born out of their own experience, understanding them through neoclassicalmacroeconomics models and orthodox national accounting method could become, at times, afutile exercise leading to nowhere and frustration. Therefore, we need different tactics. Indeedour proposal of studying the rent is rooted in the classical tradition of Marx, Smith, Ricardo, andMalthus among others. In the past few years, we have done some descriptive research on thistopic, we want now to actualize some data on the Venezuelan case, via some graphics to updatepast works and illustrate the equation used to calculate extraordinary revenues capture by oilcountries in the world market.
Not only do mineral rich societies manage strategic mineral resources for the internationalmarket, they also -capital surplus countries- own large Sovereign Wealth Fund (SWF) ( seewww.swfinstitute.org) composed of financial and other assets such as corporate bonds, stocksfutures in the commodity markets , real state property, precious metals and so on. These fundsare for the most part the result of oil as gas surplus income or if we prefer, rent collected in theinternational market, as seen in the table kindle provided by SWF Institute. Therefore, they nowplay an important role in the world market not just suppliers of raw material, but also of lendersof money for stressed economies as the recent financial crises demonstrated. As we know, thegravity center of world geopolitical and geo-economics is changing at a fast rate from thetraditional occidental foundations to a multi-polar world , so being knowledgeable aboutemerging economies, their inner working, is vital to understand the new world that is coming ouin the horizon. Large capital surplus countries will play a significant role in that future.
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Sovereign Wealth Fund Rankings
Largest Sovereign Wealth Funds by Assets under Management
Country Fund Name Assets
$Billion
Inception Origin Linaburg-
Maduell
Transparency
Index
UAE Abu
Dhabi
Abu Dhabi
Investment
Authority
$627 1976 Oil 3
Norway
Government
Pension Fund
Global
$512 1990 Oil 10
Saudi
Arabia
SAMA Foreign
Holdings $439.1 n/a Oil 2
ChinaSAFE Investment
Company$347.1** 1997
Non-
Commodity2
ChinaChina Investment
Corporation$332.4 2007
Non-
Commodity6
China
Hong Kong
Hong Kong
Monetary Authority
Investment
Portfolio
$259.3 1993Non-
Commodity8
Singapore
Government of
Singapore
Investment
Corporation
$247.5 1981Non-
Commodity6
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KuwaitKuwait Investment
Authority$202.8 1953 Oil 6
ChinaNational Social
Security Fund$146.5 2000
Non-
commodity5
RussiaNational Welfare
Fund$142.5* 2008 Oil 5
Singapore Temasek Holdings $133 1974Non-
Commodity10
QatarQatar Investment
Authority$85 2005 Oil 5
LibyaLibyan Investment
Authority$70 2006 Oil 2
AustraliaAustralian Future
Fund$67.2 2004
Non-
Commodity9
AlgeriaRevenue
Regulation Fund$56.7 2000 Oil 1
KazakhstanKazakhstan
National Fund $38 2000 Oil 6
South
Korea
Korea Investment
Corporation$37 2005
Non-
Commodity9
US
Alaska
Alaska Permanent
Fund$37 1976 Oil 10
IrelandNational Pensions
Reserve Fund$33 2001
Non-
Commodity10
BruneiBrunei Investment
Agency$30 1983 Oil 1
FranceStrategic
Investment Fund$28 2008
Non-
Commodityn/a
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MalaysiaKhazanah
National$25 1993
Non-
Commodity4
IranOil Stabilization
Fund$23 1999 Oil 1
Chile
Social and
Economic
Stabilization Fund
$21.8 1985 Copper 10
Azerbaijan State Oil Fund $21.7 1999 Oil 10
UAE
Dubai
Investment
Corporation of
Dubai
$19.6 2006 Oil 4
CanadaAlbertas Heritage
Fund$14.4 1976 Oil 9
UAE Abu
Dhabi
International
Petroleum
Investment
Company
$14 1984 Oil n/a
US New
Mexico
New Mexico State
Investment
Council
$13.8 1958Non-
Commodity9
UAE Abu
Dhabi
Mubadala
Development
Company
$13.3 2002 Oil 10
NewZealand
New Zealand
Superannuation
Fund
$12.1 2003 Non-Commodity
10
BahrainMumtalakat
Holding Company$9.1 2006 Oil 8
BrazilSovereign Fund of
Brazil$8.6 2009
Non-
commoditynew
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OmanState General
Reserve Fund$8.2 1980 Oil & Gas 1
Botswana Pula Fund $6.9 1994Diamonds
& Minerals1
East TimorTimor-Leste
Petroleum Fund$6.3 2005 Oil & Gas 6
Saudi
Arabia
Public Investment
Fund$5.3 2008 Oil 3
China
China-Africa
Development
Fund
$5.0 2007Non-
Commodity4
US
Wyoming
Permanent
Wyoming Mineral
Trust Fund
$4.7 1974 Minerals 9
Trinidad &
Tobago
Heritage and
Stabilization Fund$2.9 2000 Oil 5
UAE Ras
Al Khaimah
RAK Investment
Authority $1.2 2005 Oil 3
Venezuela FEM $0.8 1998 Oil 1
Vietnam
State Capital
Investment
Corporation
$0.5 2006Non-
Commodity4
NigeriaExcess Crude
Account$0.5 2004 Oil 1
Kiribati
Revenue
Equalization
Reserve Fund
$0.4 1956 Phosphates 1
IndonesiaGovernment
Investment Unit$0.3 2006
Non-
commodityn/a
Mauritania National Fund for $0.3 2006 Oil & Gas 1
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Hydrocarbon
Reserves
UAE
Federal
Emirates
InvestmentAuthority
n/a 2007 Oil 2
OmanOman Investment
Fundn/a 2006 Oil n/a
UAE Abu
Dhabi
Abu Dhabi
Investment
Council
n/a 2007 Oil n/a
Total Oil & GasRelated
$2,380.7
Total Other $1,730.1
TOTAL $4,110.8
*This includes the oil stabilization fund of Russia.**This number is best guess estimation
***All figures quoted are from official sources, or, where the institutions concerned do not issuestatistics of their assets, from other publicly available sources. Some of these figures are bestestimates as market values change day to day.Updated November 2010
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Updated November 2010
December 2009
Source: Sovereign Wealth Fund Archives
Venezuela has created some Funds beside the FEM to accumulate large surplus in currentaccount, but they are a black boxes due to our political deinstitutionalize system. We presumethat funds like Fonden and Fondo Miranda, besides being used to finance social politicallegitimizing programs and large infrastructure programs, like the 20.000 km plan railroadnetwork system are being employed to finance a costly foreign policy oriented toward exporting
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the revolution. Cuba alone is receiving from Venezuela 14% of her GDP in donations, oilsubsidies and cash transfers for non-tradable services.
At this point, our interest will shift to calculating oil rent and then examine their long-term performance in Venezuela. We prefer to use a long run approach, since we consider it moreaccurate to define the role of oil rent in the performing of the economic growth rate.
The proposed equation could be used in general for natural rich rentiers capitalisteconomies or regions: Yet we believe it can be work out to be more precise.
NRS non-oil: Normal rate of surplus non-oil economyOS non oil: Operating surplus non oil economyOS oil: Operating surplus oil economy
NRS oil: Normal rate of surplus oilSW non-oil: Salaries and wages non oil economyFCC non oil: Fixed capital consumption non oil economySW oil: Salaries and Wages oilFCC: Fixed capital consumption oil
NRS non oil = OS non oil/ (SW non oil + FCC non oil)NRS oil = (SW oil + FCC oil)* NRS non oil
Thus separating from the operating oil surplus ( excedente de explotacin), the fraction considera normal profit rate and obtaining as a residual the landowner income (State). This last one is thOIL RENT or extraordinary revenues. Hence, the payment received for the property rights(sometimes called royalty but not necessarily equal to it) on the land and subsoil where oil orothers mineral resources are being exploited. That rent logically is pay by the consumers sectorof oil importing nations, much less by consumers in oil countries since oil byproducts are
subsidized. It is not (the rent) the product of work in the rentiers economy. If we want to seethis in a microenvironment, when a vehicle user, in advance capitalist country, fills its gasolinetank, a fraction of that money he or she spends returns to the oil producer nation as a rent. In thissense, the State proprietor in the rich minerals resource country acts like a Feudal landlord.
Already the PODE inform of the Venezuelan Ministry of Energy used this equation tocalculate the rent contribution to the national economy in 2006. The Central Bank still uses theold methodological approach of petroleum GDP and non-petroleum GDP but in the internationa
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standard national accounting framework. Therefore, from the Central Bank procedures isimpossible to obtain the oil rent, but we can get the necessary basic information to calculate itThe World Bank also produces some figure on natural capital depletation and oil rent, but forVenezuela, we think, both are overestimated. This equation could be improved, for example, bychanging NRS non-oil for the average profit rate before taxes of largest multinational energycorporations given thus a more precise nature of oil industry performance; deducting thisnormal profit rate from the operational surplus of oil exploitation under specific property rightconditions mention. This equation could also be used with advantages in different that oil,mineral resources rich countries; adjusting it to the economic sector in question.
Using the above equation, we calculated the Venezuelan oil rent and its relation withGDP in the long term as can be seen in the following figures. For that purpose, we used data from
the Anuarios Estadsticos, Series Estadsticas de Venezuela de los ltimos Cincuenta Aos, LaEconoma Venezolana en los ltimos Treinta Aos of the Central Bank, Petrleo y otros DatosEconmicos (Pode) from the Ministry of Energy and Mines. All graphs refer to VenezuelaFigure 1
GDP and Oil Rent Per Capita 1936-2009International dollars 1990
0
500
1,000
1,500
2,0002,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
10,000
10,500
1 9 3 6
1 9 3 9
1 9 4 2
1 9 4 5
1 9 4 8
1 9 5 1
1 9 5 4
1 9 5 7
1 9 6 0
1 9 6 3
1 9 6 6
1 9 6 9
1 9 7 2
1 9 7 5
1 9 7 8
1 9 8 1
1 9 8 4
1 9 8 7
1 9 9 0
1 9 9 3
1 9 9 6
1 9 9 9
2 0 0 2
2 0 0 5
2 0 0 8
U S A
d o
l l a r s
GDP per capita Oil Rent per capita
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 2
GDP and International Oil Rent growth 1936-2009Index 1936=100
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0800.0
900.0
1000.0
1100.0
1200.0
1300.0
1400.0
1500.0
1600.0
1700.0
1800.0
1900.0
2000.0
1 9 3 6
1 9 3 9
1 9 4 2
1 9 4 5
1 9 4 8
1 9 5 1
1 9 5 4
1 9 5 7
1 9 6 0
1 9 6 3
1 9 6 6
1 9 6 9
1 9 7 2
1 9 7 5
1 9 7 8
1 9 8 1
1 9 8 4
1 9 8 7
1 9 9 0
1 9 9 3
1 9 9 6
1 9 9 9
2 0 0 2
2 0 0 5
2 0 0 8
Oil Rent Per Capita GDP per Capita
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 3
GDP Standard and GDP minus International Oil Rent 1936-2009International Dollar 1990
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
U S A
D o
l l a r
GDP per capita minus Oil Rent GDP per capita Standard
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 4
Oil Rent Per capita and Population Growth Index Numbers 1936-20091936=100
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
Oil Rent Per Capita Population Growth
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 5
GDP per Capita Growth and Population 1936-2009Index 1936=100
0
100
200
300
400
500
600
700
800
900
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
population growth GDP Growth per capita
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 6
GDP and International Oil Rent growth 1936-2009Index 1936=100
0
100
200
300
400
500600
700
800
900
1000
1100
1200
1300
1400
1500
1600
1700
18001900
2000
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
Oil Rent Per Capita GDP per Capita
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 7
Oil Rent growth and Oil Prices real terms 1936-1990Index 1936=100
0
100
200
300
400
500
600
700
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
Oil rent Oil Prices
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 8
GDP Standard and International Rent Per Capita 1936-2009International Dollar 1990
0
2,000
4,000
6,000
8,000
10,000
12,000
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
U S A
D o
l l a r s
0
500
1,000
1,500
2,000
2,500
3,000
U S A
D o
l l a r s
GDP Per Capita Oil Rent per Capita
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 9
International Oil Rent Per Capita 1936-2009International Dollar 1990
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
U s a
d o
l l a r s
International Oil Rent
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 10
International Oil Rent as a % of GDP 1936-2009International Dollar 1990
0
5
10
15
20
25
30
1 9 3 6
1 9 3 8
1 9 4 0
1 9 4 2
1 9 4 4
1 9 4 6
1 9 4 8
1 9 5 0
1 9 5 2
1 9 5 4
1 9 5 6
1 9 5 8
1 9 6 0
1 9 6 2
1 9 6 4
1 9 6 6
1 9 6 8
1 9 7 0
1 9 7 2
1 9 7 4
1 9 7 6
1 9 7 8
1 9 8 0
1 9 8 2
1 9 8 4
1 9 8 6
1 9 8 8
1 9 9 0
1 9 9 2
1 9 9 4
1 9 9 6
1 9 9 8
2 0 0 0
2 0 0 2
2 0 0 4
2 0 0 6
2 0 0 8
p e r c e n
t
International Oil Rent
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 11
Prices of Venezuelan Oil 1936-2009CPI Usa dollars 1990
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
1 9 3 6
1 9 4 0
1 9 4 4
1 9 4 8
1 9 5 2
1 9 5 6
1 9 6 0
1 9 6 4
1 9 6 8
1 9 7 2
1 9 7 6
1 9 8 0
1 9 8 4
1 9 8 8
1 9 9 2
1 9 9 6
2 0 0 0
2 0 0 4
2 0 0 8
U S D o
l l a r s
Prices of Venezuelan Oil Basket
Sources: Central Bank of Venezuela (BCV), Ministry of Energy and Mines and authorscalculation
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Figure 12
Average GDP and Oil Rent 1936-2009International Dollars 1990
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Average GDP Average Oil Rent
Average GDP 2347.88 3869.75 5865 7307.25 8344.5 8933.25 7427.38 7638.63 7531.9
Average Oil Rent 109.5 149.5 387.5 622.62 907 1070.88 705.62 886.25 1596.3
1936-43 1944-51 1952-59 1960-67 1968-75 1976-83 1984-91 1992-99 2000-09
Sources: BCV, Ministry of Energy and Mines and authors calculation
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Bibliography
Anuarios Estadsticos Ministerio de Fomento, varios aos.Memorias Ministerio de Hacienda, varios aos.De Corso G (1999) The Falling Oil Rent and Venezuelas Economics Decline: A QuantitativeAnalysisBCV Anuarios Estadsticos hasta el 2006BCV pagina WEB, y Series Estadsticas de Venezuela de los ltimos Cincuenta AosBCV. 1971. La Economa Venezolana en los ltimos Treinta y Cinco Aos Caracas.CEPAL-Ministerio de Fomento. 1957. El Desarrollo reciente de la economa venezolanaPetrleo y otros Datos Econmicos antiguo Ministerio de Energa y minas varios aos y actualMinisterio del Poder Popular Para la Energa y el Petrleo