Stanford Oil Wealth Management: Benchmarking Success

Organization: Stanford Center on Democracy, Development, and the Rule of Law
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With recent increases in oil prices, oil-exporting states are simultaneously awash with cash and aware of the negative economic and political spillover effects heavy reliance on oil revenues can bring about. This paper from Christine Jojarth of the Stanford Center on Democracy, Development, and the Rule of Law reports that states are eager to learn from experience and from their peers how to mitigate these problems, and its dataset provides information to assist oil states in managing their wealth wisely.

The Stanford Oil Wealth Management (SOWM) dataset provides an empirical foundation in support of oil states’ efforts to manage their oil wealth wisely, to maximize the social and economic development outcomes they achieve from the monetization of their hydrocarbon resources. For this purpose, the SOWM dataset distinguishes three stages in the “oil well-to-hospital” value chain where each stage presents its own particular governance challenges. The first stage, revenue generation, analyzes how the petroleum sector is organized. Does a country's regulatory and fiscal framework facilitate efficient and sustainable oil and gas production and assign the greatest possible share of so-generated rents to the government? The second stage, revenue management, examines the extent to which oil states manage to mitigate negative spill-over effects of the hydrocarbon sector on the non-oil economy. The third and final stage, revenue disbursement, sheds light on governments’ ability to maximize the social value of public spending. In each of the three stages, the Stanford Oil Wealth Management dataset distinguishes between outcome-related and policy-related indicators. The former highlight how much of the desired outcome a country manages to realize. How much money does the state get for every barrel of oil and gas that is being extracted (Stage 1)? How fast does the non-oil sector grow (Stage 2)? How developed is that country’s physical infrastructure and human capital (Stage 3)?