Abstract
An oil exporting country, paying in oil for a substantial amount of manufactured imports, is vulnerable to changes in the international oil price and should take into account in its national economic planning that oil revenues are highly uncertain. The paper discusses how this uncertainty can be dealt with. A stochastic wealth management approach to national economic planning is introduced in which the uncertainty is connected with the rates of return on various assets. For oil resources the world market price is the source of uncertainty in the rate of return. The cptimization framework is based on an assumption of constant absolute risk aversion. The paper discusses how a stochastic optimization framework can be combined with a deterministic multisectoral simulation model used for long-term economic planning in Norway.
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