Oil Rents Research Articles

Sustainable Economic Development in China: Balancing Growth and Environmental Concerns

Purpose: Over the last three decades, China’s economy has grown remarkably, ranking second in the world among all countries. China’s market-oriented policies, which give priority to economic development, are credited with the country’s economic boom. China’s remarkable economic growth in recent years has had a significant effect on the environmental balance of the nation. Presently, Chinese authorities must address environmental issues without impeding the nation’s progress. Even though China’s economy has expanded quickly since reforms and the opening up, the country’s environmental degradation issue has gotten more serious.Examine China’s current strategies for economic development and their effects on environmental sustainability and economic growth.The dynamic connects between the highlighted factors (renewable consumption of energy, economic expansion, oil rent, and resources of all kinds) and the increase in greenhouse gas emissions—a proxy for environmental sustainability—is examined in this article using China as an example.The findings of an empirical study using every year data from 2018 to 2022 and the auto-regressive distribution lag limits technique point to the existence of a long-run equilibrium link between each of the variables highlighted and greenhouse gas emissions. Specifically, since they have a negative impact on greenhouse gas emissions, the usage of renewable energy sources and petroleum rents contribute to ecological sustainability.In conclusion, China’s commitment to sustainability may benefit from some of the remedies this paper’s results suggest. This study demonstrates the useful use of New Structure Economy in a crucial industrial area in China, adding to the body of knowledge on sustainability in the environment and economic development.

Monetary Policy, Oil Rents, Exchange Rate and Consumer Prices Nexus: A Case Study of Pakistan

This research examines the effects of monetary policy in the form of nominal money supply, economic growth, exchange rate, and oil rents on domestic prices for Pakistan's economy. By taking an annual data series, this research reports evidence of mixed integrated order of the data series. The estimates of the ARDL bounds test suggest that consumer prices have a long-run cointegrating relation with its factors. The findings also highlight that the money supply supports the causality thesis, indicating that when the money supply stretches, it accelerates domestic prices. Moreover, it is also exposed that domestic output, exchange rates, and oil rents have significant and appreciating effects on consumer prices in both time spans. These results are robust to the diagnostics used in this research ensuring the reliability of the results. Based on these results, money supply and exchange rate should be controlled by the policymakers in such a way that it should not allow domestic prices to rise. Moreover, an attempt should be made via which increase in domestic out, and oil rents should remain greater than the increase in prices.

Are Natural Resources Harmful to the Ecology? Fresh Insights from Middle East and North African Resource-Abundant Countries

The Middle East and North African (MENA) region is among the regions most impacted by global warming and climate change. At the same time, the region accounts for 58% of global oil reserves and 43% of global natural gas reserves. It is, therefore, important to assess the role of natural resource abundance in the environmental degradation faced by MENA resource-abundant countries. This study contributes to this research area by exploring the short- and long-term repercussions of natural resources on the ecological footprint (EFP) of eight resource-rich MENA countries between 2000 and 2021. The research performs both aggregate and disaggregate assessments by considering the total resource rents, as well as specific rents of oil, natural gas, and minerals. The pooled mean group estimator indicates that a rise of 1% in total natural resources induces an increase of 0.053% in the EFP, implying that natural resources are harmful to the environment. The disaggregate analysis shows that oil rents have the most adverse environmental effects in the long run, followed by natural gas. Finally, mineral rents are determined to be neutral vis-à-vis the environment. In light of these findings, policy recommendations for reducing the adverse environmental impacts of natural resources are suggested.

From black to green: Quantifying the impact of economic growth, resource management, and green technologies on CO2 emissions

In an exploration of environmental concerns, this groundbreaking research delves into the relationship between GDP per capita, coal rents, forest rents, mineral rents, oil rents, natural gas rents, fossil fuels, renewables, environmental tax and environment-related technologies on CO2 emissions in 30 highly emitting countries from 1995 to 2021 using instrumental-variables regression Two-Stage least squares (IV-2SLS) regression and two-step system generalized method of moments (GMM) estimates. Our results indicate a significant positive relationship between economic growth and CO2 emissions across all quantiles, showcasing an EKC with diminishing marginal effects. Coal rents exhibit a statistically significant negative relationship with emissions, particularly in higher quantiles, and mineral rents show a negative association with CO2 emissions in lower and middle quantiles, reinforcing the idea of resource management in emissions reduction. Fossil fuels exert a considerable adverse impact on emissions, with a rising effect in progressive quantiles. Conversely, renewable energy significantly curtails CO2 emissions, with higher impacts in lower quantiles. Environmental tax also mitigates CO2 emissions. Environment-related technologies play a pivotal role in emission reduction, particularly in lower and middle quantiles, emphasizing the need for innovative solutions. These findings provide valuable insights for policymakers, highlighting the importance of tailoring interventions to different emission levels and leveraging diverse strategies for sustainable development.

The static and dynamic effects of oil rent on competitiveness: Application to the case of Saudi Arabia during the period 1970–2022

In this paper, we explore the static and dynamic effects of oil rent on competitiveness in Saudi Arabia’s economy during the period 1970–2022. In addition, we examined the short-run, strong and long-run relationships between exports and industry, inflation, energy use (oil rents) and agriculture using the Autoregressive Distributed Lag (ARDL) approach developed. The analysis showed that government spending will contribute to enhancing the competitive environment with a difference of one year. Moreover, the industry will contribute to increasing competitiveness for a positive relationship in the long term. The results stated that there is an insignificant relationship between competitiveness, inflation, and oil rents. The analysis also shows that inflation has a negative impact with statistical significance in the short term. In addition, the error correction model (ECM) coefficient is negative and has statistical significance at 0.76 at a 1% significant level, which indicates the existence of an error correction mechanism and thus the existence of a long-term relationship between the variables.

Nexus between total natural resource rents and public debt within symmetric and asymmetric framework: Fresh insight from resource-rich economy

Many economies abundant in natural resources often leverage the rents from these resources as collateral for borrowing during periods of economic boom, intending to repay debts during periods of windfall. However, this practice can cultivate irresponsible borrowing tendencies, potentially leading to debt trap scenarios when global resource prices decline. Thus, our study delves into the interaction between public debt (PD) and total natural resource rents (TNR), examining both aggregate and disaggregate forms, with a specific focus on India spanning from 1980-81 to 2021–22.Our aggregate analysis reveals that PD exhibits heightened responsiveness to negative shocks in TNR compared to positive shocks, indicating an asymmetric impact of TNR on PD within the Indian context. Additionally, disaggregate analysis uncovers that both positive and negative shocks in coal rents (CR), natural gas rents (NGR), and forest rents (FR) significantly and adversely affect PD. Furthermore, a positive shock in mineral rents (MR) demonstrates a negative and significant impact on PD, while a negative shock in MR yields a positive but insignificant impact on PD. Overall, barring oil rents (OR), other forms of resource rents such as CR, NGR, FR, and MR showcase asymmetric and negative effects on PD. These findings underscore the importance of prudent institutional behavior and sound economic policies in overseeing and managing debt sustainability in resource-rich economies.

Rentierism—Political Instability Nexus: The Danger of Oil-producing Region Crisis in Nigeria

The growing popularity of the rentier state theory has made the focus on the impact of oil rents on political stability central for revealing how natural resource (including oil) windfalls link to the weakness of institutional quality in any resource-rich economy. Considering the core characteristic of a rentier state (such as Nigeria)—a distributive political economy—the article examines how the stability of Nigerian political system can be affected by oil rents over the period 1996–2021. Through the adoption of autoregressive distributed lag (ARDL) bounds test to cointegration and vector error correction mechanism (VECM) for the test of long-run causality, the apparent effect of oil rents on Nigerian political development is reflected in the analyses and findings. Empirical evidence supports the oil impedes political stability assertion, as there is statistically valid negative association between oil rents and political stability in the short run and long run. It is demonstrated that oil wealth could offer greater incentives for civil conflicts, which have resulted in escalating political problems. In addition, the causality mechanism implies that the relationship found merely indicates association between oil rents and the level of political stability in the long term, and it is not causal. Thus, it is posited that through the adoption and implementation of sound policy measures, the escalation of conflicts would likely subside, especially in most oil-rich regions or states, whereas civil order could be promoted. It is, therefore, critical to enhancing fairness in the use and distribution of oil wealth, improving people’s welfare, particularly in the oil-producing communities and in general, ensuring that democratic principles in the management of resource windfalls are sustained. JEL: Q33, Q34, H56, H12

Oil price, energy consumption and CO2 emissions as growth determinants: a PVAR system GMM approach

PurposeThis study aims to revisit the empirical debate about the asymmetric relationship between oil prices, energy consumption, CO2 emissions and economic growth in a panel of 184 countries from 1981 to 2020.Design/methodology/approachA relatively new research method, the PVAR system GMM, is applied.FindingsThe outcome of the PVAR system GMM model at the group level in the study suggests that oil prices exert a positive but statistically insignificant effect on economic growth. Energy consumption is inversely related to economic growth but statistically significant, and the correlation between CO2 emissions and economic growth is negative but statistically insignificant. The Granger causality test indicates that oil prices, CO2 emissions, oil rents, energy consumption and savings jointly Granger-cause economic growth. A unidirectional causality runs from energy consumption, savings and economic growth to oil prices. At countries’ income grouping levels, oil prices, oil rent, CO2 emissions, energy consumption and savings jointly Granger-cause economic growth for the high-income and upper-middle-income countries groups only, while those variables did not jointly Granger-cause economic growth for the low-income and lower-middle-income countries groups. The modulus emanating from the eigenvalue stability condition with the roots of the companion matrix indicates that the model is stable. The results support the asymmetric impacts of oil prices on economic growth and aid policy formulation, particularly the cross-country disparities regarding the nexus between oil prices and growth.Originality/valueFrom a methodological perspective, to the best of the author’s knowledge, the study is the first attempt to use the PVAR system GMM and such a large sample group of 184 economies in the post-COVID-19 era to examine the impacts of oil prices on countries’ growth while controlling for other crucial variables, which is noteworthy. Two, using the World Bank categorisation of countries according to income groups, the study adds another layer of contribution to the literature by decomposing the 184 sample economies into four income groups: high-income, low-income, upper-middle-income and lower-middle-income groups to investigate the potential for asymmetric effects of oil prices on growth, the first of its kind in the post-COVID-19 period.

Understanding dollar dynamics and SME performance in GCC economies

PurposeThis study investigates the impact of US dollar volatility and oil rents on the performance of small and medium-sized enterprises (SMEs) in the Gulf Cooperation Council (GCC) region, with an emphasis on understanding how these factors influence SME financing constraints in economies with fixed currency regimes.Design/methodology/approachEmploying a random effects panel regression analysis, this research considers US dollar volatility and oil rents as independent variables, with SME performance, measured through the financing gap, as the dependent variable. Controls such as trade balance, inflation deltas and gross domestic product (GDP) growth are included to isolate their effects on SME financing constraints.FindingsThe study reveals a significant positive relationship between dollar volatility and the financing gap, suggesting that increased volatility can exacerbate SME financing constraints. Conversely, oil rents did not show a significant direct influence on SME performance. The trade balance and inflation deltas were found to have significant effects, highlighting the multifaceted nature of economic variables affecting SMEs.Research limitations/implicationsThe study acknowledges potential biases due to omitted variables and the limitations inherent in the use of secondary data.Practical implicationsFindings offer pertinent guidance for SMEs and policymakers in the GCC region seeking to develop strategies that mitigate the impact of currency volatility and support SME financing.Originality/valueThe research provides new insights into the dynamics of SME performance within fixed currency regimes, which significantly contributes to the limited literature in this area. The paper further underscores the complex connections between global economic factors and SME financial health.

How disaggregated natural resources rents affect financial development: From the perspective of sustainable development

Enhancing financial development has emerged as a paramount goal for nations worldwide, reflecting its pivotal role in fostering economic growth, stability, and prosperity. A developed financial system is inevitable for achieving sustainable development in a country. Therefore, it is essential to take measures that promote financial development. Also, promoting financial development entails knowledge of the determinants of financial development. Therefore, the present study intends to investigate whether during the period from 1989 to 2021, whether coal, oil, and natural gas rents have any impact on financial development in China. To that end, we adopt the novel Fourier ARDL modeling. The results claim that oil rent escalates financial development in the long run, while gas and coal rent impede it. On the contrary, oil rent mitigates financial development in the short run, whereas gas and coal rent promote it. Thus, we direct several policy stances to promote financial development.

Mineral resources and intellectual capital: Asymmetrical impacts and sustainable development outcomes

The existence and use of natural resources, and the impact that they have on sustainable development is a topic that has received significant attention, with a particular focus on the “resource curse hypothesis.” However, there is limited research that explores the combined role of natural resources and human capital, specifically when it comes to the realm of endogenous sustainable development. This study, therefore, takes into account this research gap, and investigates the interrelationship between natural resources, human capital, and sustainable development, specifically in the context of China. By conducting an advanced econometric analysis, we have examined the influence of oil rents, forest rents, and mineral rents on China's economic growth from the years spanning from 1992 to 2022, while considering the control variables such as foreign direct investment (FDI) and research and development (R&D) expenditures. Our findings have revealed an asymmetric impact of mineral rents and oil rents on economic growth, while forest rents have shown a positive and considerable influence as well. This essentially indicates the presence of beneficial effects from forest resources. Moreover, we have also observed a positive association between human capital and economic expansion. in addition to this, expenditures such as those pertaining to FDI and R&D are shown to stimulate economic growth in China. Furthermore, this study also finds bi-directional causality between oil rents, FDI, and human capital, while forest rents, mineral rents, and R&D expenditures show an uni-directional causal relationship with economic growth in China. Our study contributes towards the understanding of the complex dynamics that exist between natural resources, human capital, and sustainable development in China. These findings have policy implications for sustainable development through resource management, human capital development, and technological innovation.

The Role of Innovation in Promoting Economic Diversification In Mena Oil-Exporting Countries: An Empirical Study

This paper casts light on the role innovation seems to play in accelerating economic diversification in 11 MENA oil-exporting countries over the period 1996-2019. More specifically, the novelty of this paper principally lies in detecting the rate of increase in the level of economic diversification if these countries’ rates of innovation will be on par with those of a country that has successfully diversified its export base, like Canada. The results gleaned from using the Arellano-Bond difference GMM estimator demonstrate that strengthening innovation can give a sturdy impetus to economic diversification in oil-rich MENA countries. More precisely, the GCC countries' level of innovation-driven economic diversification is likely to increase more rapidly than that of non-GCC countries. The findings also illustrate that MENA oil exporters’ economic diversification seems to be positively and significantly influenced by governance, human development, credit to the private sector, and economic freedom. Surprisingly, oil rents appear to genuinely frustrate these countries' efforts to diversify their economies. Furthermore, good governance and oil revenues can jointly speed up these countries’ economic diversification. More importantly, the results distinctly unearthed that MENA oil exporters’ economic diversification will increase by 1.77% if their innovation rates can catch up with those of Canada. By and large, encouraging innovation and technological development proved to be a truly giant step forward in these countries’ endeavors for economic diversification.

Oil rent, corruption and economic growth relationship in Nigeria: evidence from various estimation techniques

PurposeDespite the huge financial resources associated with oil, Nigeria has consistently recorded poor growth performance. Therefore, this study aims to examine how corruption and oil rent influence Nigeria’s economic performance during the 1996–2021 period.Design/methodology/approachVarious estimation techniques were used. These include the bootstrap autoregressive distributed lag (ARDL) bounds-testing, dynamic ordinary least squares (DOLS), the fully modified OLS (FMOLS) and the canonical cointegration regression (CCR) estimators and the Toda–Yamamoto causality.FindingsThe bounds testing results provide evidence of a cointegrating relationship between the variables. In addition, the results of the ARDL, DOLS, CCR and FMOLS estimators demonstrate that oil rent and corruption have a significant positive impact on growth. Further, the results indicate that human capital and financial development enhance economic growth, whereas domestic investment and unemployment rates slow down long-term growth. Additionally, the causality test results illustrate the presence of a one-way causality from oil rent to economic growth and a bi-directional causal relationship between corruption and economic growth.Originality/valueExisting studies focused on the effects of either oil rent or corruption on growth in Nigeria. Little attention has been paid to the exploration of how the rent from oil and the pervasiveness of corruption contribute to the performance of the Nigerian economy. Based on the outcome of this study, strategies and policies geared towards reducing oil dependence and the pervasiveness of corruption, enhancing human capital and financial development and reducing unemployment are recommended.

Resource abundance: Blessing or curse? Comparative analyses of point and diffuse resources

The objective of this study is to assess the short and long run effects of renewable and non-renewable resource rents on economic growth in Cameroon. Taking crude oil rents and forest resource rents as proxies for non-renewable and renewable resources respectively for the period 1977–2018, we employed the autoregressive and dynamic autoregressive distributive lag (ARDL/DynARDL) modelling frameworks to achieve the stated objective. Results from the ARDL model indicate that, in the short run, both the renewable and non-renewable resources have a positive and significant effect on economic growth but the point resource is more significant than the diffused. A clear disparity in results is however noticed in the long run. While the point resources show that natural resources are a curse to long run growth, the diffuse resources reveal that natural resources are a blessing to long run growth. From the DynARDL simulation, a negative shock of the point resources leads to a fall in economic growth whereas diffuse resource indicates an increase. This shows that point resources are more prone to the resource-curse thesis and diffuse resources to resource-bless thesis. Contingent on these findings, the Cameroon government should ensure a proper allocation of natural resource revenues especially point resource rents to growth-inducing investment or social overhead capital such as open new markets, transport infrastructures, and power sectors, so as to enhance growth and development.

Revisiting the natural resources rent and financial development nexus: Does geopolitical risk and corruption really matters?

A country's ability to prosper economically depends on having a robust financial system and a growing financial industry since they operate as the cornerstone for promoting economic activity and growth. Current study explores the relationship between Saudi Arabia's financial prosperity and its natural resources, namely oil rents by scrutinizing the moderating influence of corruption and geo-political risk. We further ecompassed the controlling effects of energy efficiency and economic growth in our study. Pertinent time series procedures are specified, which contain ADF with break years, Bayer-Hanck for long-term equillibrium, and simple least squares with the break years as primary and final methods. The Granger causality approach is utilized for robustness check, fully modified OLS, and a causal relationship. The results unearth that variables have been found static at the first difference. Moreover, outcomes reveal that oil rent is a curse for Saudi Arabia's financial development. When decreased, corruption's moderating role can transform curse of oil resources into blessings, while geo-political risks have remained insignificant. Moreover, the impact of energy efficiency has adverse and significant. Despite the structural breaks applied, GDP is provided to enhance financial development in Saudi Arabia. The robustness check analysis provides similar and reliable estimates.

The Relationship between Natural Resource Abundance and Human Development in Belt and Road Initiative Countries: The Role of Financial Development

The goal of this study is to explore the relationship between natural resource abundance and human development. In particular, account for the role of financial development. This study uses data from 51 BRI countries over the period 2000-2018. Concerning the HDI, the results suggest U-shaped relationship between total natural resource rents and HDI. Similarly, gas rents, mineral rents and oil rents are non-linearly related to HDI in BRI countries. For example, in the case of total rents, once its share in GDP exceeds 42.8%, further dependence on natural resources leads to increase in HDI. In our sample, only Iraq, Kuwait, Saudi Arabia and Oman were above the turning points at some observation years. The interaction term is positive and significant. This implies that increase in natural resource rents in countries with higher levels of financial development does not lead to a reduction of human development. In a similar vein, domestic credit to private sector alleviates negative effect of oil and mineral rents.

Evaluating the effect of mineral resources on the accessibility of green power: A global perspective

Natural resources serve as a foundation for economic prosperity, but comprehending their specific influence in promoting green electricity access presents a compelling yet unexplored question in economic research. The link between natural resources and green electricity is a critical yet understudied topic. Although many studies have looked at resource availability, economic growth, and monetary advancement, there's a shortage of research focusing on green electricity. Our study addresses this knowledge gap by examining how natural resources affect electricity access from 1989 to 2021, considering the role of economic growth and renewable electricity and energy. We use several advanced analytical methods to explore the role of natural resources. Our results show that while individual (or disaggregated) natural resources do not have a clear relationship with electricity access, natural resources as a whole (or aggregated) have a substantial impact. Moreover, we find that a growing economy and the use of renewable energy sources are good for electricity access. The robustness check shows a two-way relationship between GDP and oil rents with electricity access but only a one-way relationship for unrestricted natural resources, renewable energy electricity, and forest rents. Based on these findings, we propose strategies for policymakers to enhance global electricity supply by promoting renewable energy, sustainable use of natural resources, and promoting economic expansion.

Strategic resource management for economic sustainability: Assessing the impact of technological advancement and energy efficiency

In the last two decades, numerous empirical studies have been done exploring the relationship between natural resources and economic growth. Still, the contradictory findings lead the policymakers and governments to adopt inadequate and inappropriate policies for sustainable development. Following the trend, the present study examines the nexus of natural resources and trade with the economic performance of the top global economies during 1988–2021. Using the second and third-generation econometric approaches, this study found the validity of the long-run equilibrium relationship between mineral rents, trade, oil rents, and economic performance. This study employs the cross-section augmented autoregressive distributed lag estimator and concludes that natural resources are adversely affecting the economic performance of the region. However, trade has a beneficial impact on the economic performance. The results are found robust, where energy efficiency and technological advancement are progressively influencing economic performance. This study suggests resource management and improved trade policies to attain economic sustainability.

Taxes and Customs Duties as Instruments for Extracting Oil Rent into the State Budget: The Case of Russia

For countries focused on the extraction and processing of natural resources, including Russia, a crucial task is to ensure the rational extraction and distribution of natural rent. The tax model applied to natural rent should facilitate its optimal allocation to the budget without undermining the motivation of resource users to invest. This study seeks to gauge the extent of oil rent extraction into the Russian budget and suggest strategies to enhance the efficacy of redistributing oil rent to the state budget. Our hypothesis proposes that export customs duties, compared to the mineral extraction tax, prove more effective in achieving the desired redistribution from resource users to the budget. To assess the extent of oil rent extraction, we devised a methodology based on calculating the oil rent generated in Russia. This method involves measuring the difference between the income generated by the oil industry and the total expenses incurred by oil sector companies. Our analysis reveals that, from 2005 to 2022, up to 87% of the oil rent generated in Russia was extracted through rent payments to the state budget. However, in recent years, the degree of oil rent extraction has decreased to 56%. This decline can be attributed to the tax maneuver initiated in Russia since 2015, entailing a reduction and eventual elimination of export customs duties, coupled with an increase in the mineral extraction tax rate. Our results indicate a diminishing effectiveness of rent-based taxation in Russia due to the reduced fiscal significance of rent payments. Furthermore, their regulatory function, designed to incentivize taxpayers for investment contributions, has weakened. These findings offer valuable insights for shaping fiscal policies and lay the groundwork for further research in this domain.

The long-term relationship between oil price changes and economic growth from the perspective of the resource curse: An empirical study from Yemen.

A common conundrum discussed in economic research revolves around the fact that nations endowed with plentiful natural resources often exhibit a lower gross domestic product (GDP). This conundrum is commonly called the "resource curse", where most empirical studies about the effects primarily focused on developed economies. At the same time, limited data is available regarding a burgeoning oil-exporting nation like the Republic of Yemen. This research endeavor aims to investigate the relationship between oil price Changes and Yemen's economic growth. Utilizing annual data spanning from 1990 to 2019, the study employs the auto-regressive distributed lag (ARDL) model to establish the long-term connection between oil price volatility and economic growth over both short and long timeframes. This study's outcomes indicate that oil price Changes have a significant positive relationship with Yemen's economic growth in both the long and short run. Oil rents show a significant negative relationship with economic growth in both the long and short run. The results of GLM, RLS, and GMM robustness checks are consistent with our model results. Based on these findings, we suggest that Yemen should diversify its economy by investing in agriculture and tourism, and focus on human capital, education, and research and development. These steps could reduce the economy's dependence on oil and enhance sustainable economic growth. These empirical insights and suggestions are particularly useful for policymakers as they help build sound external and economic policies to sustain long-term economic growth.