Title page for ETD etd-08222009-040326

Type of Document Master's Thesis
Author Hatami, Hossein
URN etd-08222009-040326
Title Pricing of domestically consumed oil in Iran
Degree Master of Science
Department Agricultural Economics
Advisory Committee
Advisor Name Title
Salehi-Isfahani, Djavad Committee Chair
Shabman, Leonard A. Committee Member
Taylor, Daniel B. Committee Member
  • Mineral resources conservation
Date of Defense 1991-02-05
Availability restricted
As an oil exporting country, Iran heavily depends on the revenues generated from the sale its oil to the world. Oil revenues currently constitute about ninety percent of the nation's foreign exchange earnings, and serves as the most important determinant of all economic activities in the country. The dependency on oil incomes is anticipated to continue in the future, however, with the given proved stocks of oil and the country's potentials to instal higher production capacity, the rapidly increasing demand for oil in the domestic market may soon create undesirable consequences by severely limiting the availability of oil for export purposes. This is a factor of major concern for Iran as a developing country whose development plans and projects are to be met remarkably through the exports of its oil.

The present study reviewed the domestic pricing policies for oil products in Iran and investigated the effects of these policies on the rapidly increasing demand for oil which has been experienced in the past few decades. The varying effects of these policies which have for a long time persisted on an artificially low domestic prices were examined in relation to the role of the world market structure for oil. Also, the alternative policies for optimal pricing of oil products based on the opportunity cost of the oil consumed in Iran were introduced in order to control and moderate the current rate of increase in demand for oil, thereby securing a longer availability of oil for both domestic consumption and export purposes. The opportunity cost of the oil was in turn analyzed under both competitive and non-competitive scenarios for the world oil market. In the non-competitive scenario, the role of OPEC policies and strategies which might restrict the total production and/or exports of oil from Iran were discussed and their impacts on the opportunity cost of the oil used in the internal market were examined. In another attempt, the opportunity cost of oil and the opportunity cost of foreign exchange were used to determine the amounts of real subsidies paid by the government on four main petroleum products induding gasoline, kerosene, gas oil, and fuel oil consumed in Iran every year. The real subsidies paid in the years surveyed in this research were derived by applying the appropriate exchange rate for dollar to the international price of each product in any given year. The results of this study revealed that the nation could increase its revenues and promote the overall welfare of the country by optimally pricing of its oil for the internal consumption.

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