Investment and uncertainty in the international oil and gas industry

Klaus Mohn and Bård Misund

Energy Economics, 2009, vol. 31, issue 2, 240-248

Abstract: The standard theory of irreversible investments and real options suggests a negative relation between investment and uncertainty. Richer models with compound option structures open for a positive relationship. This paper presents a micro-econometric study of corporate investment and uncertainty in a period of market turbulence and restructuring in the international oil and gas industry. Based on data for 115 companies over the period 1992-2005, we estimate four different specifications of the q model of investment, with robust results for the uncertainty variables. The estimated models suggest that macroeconomic uncertainty creates a bottleneck for oil and gas investment and production, whereas industry-specific uncertainty has a stimulating effect.

Keywords: Capital; formation; Uncertainty; Dynamic; panel; data; models (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (53)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:31:y:2009:i:2:p:240-248

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