🛢 How to evaluate an oil production increase project’s effect on Russian economy?
Alexander Baranov, Victor Pavlov — Institute of Economics and Industrial Engineering of the Siberian Branch of Russian Academy of Sciences,
Novosibirsk State University
Main idea: Evaluation of the impact of increasing the oil production of a major oil producing company on the development of Russian economy using the dynamic input-output model
For reference: A. Baranov, V. Pavlov. Evaluation of the impact of increasing the oil production of a major oil producing company on the development of Russian economy using the dynamic input-output model. 3 September 2019. Russia, Sochi, 27th Inforum Conference, URL: https:// ecfor.ru/publication/project-of-oil-production-increase-in-russia/
This presentation happened 3 September 2019, Russia, Sochi at 27th Inforum Conference.
The conference & materials: https://ecfor.ru/27th-inforum-world-conference/
Playlist with the other videos from the conference: https://www.youtube.com/playlist?list=PLJBJFs8UgQgpmWWFzqw87jdwOBQXQmLfu
Inforum’s site: http://www.inforum.umd.edu/
Inforum, or Interindustry Forecasting at the University of Maryland, was founded nearly 50 years ago by Dr. Clopper Almon, now Professor Emeritus of the University. It is dedicated to improving business planning, government policy analysis, and the general understanding of the economic environment.
The host side was the Institute of Economic Forecasting of the Russian Academy of Sciences. IEF RAS specializes in fundamental, applied and exploratory scientific research in the field of analysis and forecasting of the socio-economic prospects of Russia and its regions, and the development of recommendations and proposals with a goal to improve the quality of economic policy in Russia. The site is https://ecfor.ru.
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Key conclusions from the study:
1. Implementation of the investment project of the Oil Company, with the provision of tax benefits to the company in the period 2019 — 2033 generally positively affects on the development of the Russian economy. In the economy as a whole, the additional gross output increase will amount to 3627 billion rubles, GDP increase will amount 2095 billion rubles (in prices 2018).
2. A positive impact of the project on the Russian economy is possible only if the additional income of the consolidated budget received from the project is used for investment purposes. In the absence of investment of additional budget revenues, the result of the project will be a simple redistribution of resources from the sectors of the economy that form the final consumption of households to the sectors that produce manufactured goods. Moreover, in the variant with the project, the gross output and GDP will not necessarily increase compared to the forecast variant without the project.
3. As a result of the study, the multiplier effects of the project for the Russian economy as a whole were evaluated. The multiplier of investments in the project of the Oil Company for gross output is 4.6, for GDP 2.7, that is, one ruble of investments in the project generates an additional 4.6 rubles of gross output and 2.7 rubles of GDP. The multiplier of the growth of gross output of the Russian economy in terms of the increase in the oil company’s output is 1.2, that is, per ruble of the growth of the oil company’s output, the gross output of the economy as a whole increases by 1.2 rubles. The tax benefit multiplier is two. In other words, for each ruble, provided by the Oil Company of tax benefits, in the future the consolidated budget of Russia will receive two additional rubles of income.
4. An analysis of the dynamics of the growth of production of industrial and consumer products, taking into account the project of the Oil Company and without it, showed signs of the Dutch disease in the Russian economy.
5. The implementation of the project will lead to structural shifts in the gross output of the Russian economy in the direction of increasing the share of oil production, engineering, construction, metallurgy, while reducing the share of industries producing consumer goods and services.
6. Since the technology of oil production in various Russian oil companies is not fundamentally different, the results can be generalized to the oil industry as a whole. An increase in oil production in Russia can lead to positive macroeconomic results only if the additional budgetary revenues are effectively used for investment and development in other sectors of the national economy.
