Shadow Pricing Indigenous Energy: Its Complexity and Implications

  • Corazon Morales Siddayao


Developing country responses to energy price changes have indicated that price, as a signal of the value of this commodity, has been as marked in influencing choices in the producing sector as in the consuming sector. The development of coal, oil, natural gas, and geothermal resources has become more viable as a result of the dramatic rise in oil prices in the 1970s. In the Asian region, the higher-cost petroleum resource accumulations (relative to those in the Middle East or North America) became economically attractive to foreign investors, although the degree of investor response has varied according to specific country contractual terms.1 Still, two divergent pricing policy trends have emerged in response to developments in the international energy market. While underpricing of consumer energy products was generally the rule rather than the exception in Asian developing countries in the 1970s, the opposite has been emerging as an approach to pricing indigenous energy resources at the supply point, especially in the net-oil importers (see Table 6.1). The approaches, in place or suggested, may be summarized as follows: (1) At one end are cases where governments are concerned about providing producers the opportunity to reap “excessively high profits” if prices are allowed to rise to import parity levels. Resources tend to be priced below their true economic costs.


Foreign Exchange Energy Price Shadow Price Shadow Prex Resource Rent 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Agarwala, R. (1983). Price Distortions and Growth in Developing Countries. Staff Working Papers No. 575. Washington, D.C.: The World Bank.Google Scholar
  2. Asian Development Bank (1982). Asian Energy Problems: A Regional Energy Survey. New York: Praeger Publishers.Google Scholar
  3. Bruno, M. (1972). “Domestic resource costs and effective protection: clarification and synthesis.” Journal of Political Economy, Vol. 80, No. 1 (January/February).Google Scholar
  4. Dasgupta, P. S. and J. E. Stiglitz (1976). Uncertainty and the Rate of Extraction Under Alternative Institutional Arrangements. Technical Report No. 179, Institute for Mathematical Studies in the Social Sciences. Stanford: Stanford University.Google Scholar
  5. Garnaut, R. and A. Clunies Ross (1975). “Uncertainty, risk aversion and the taxing of natural resource projects.,” Economic Journal, Vol. 85, No. 338 (June), pp. 272–287.CrossRefGoogle Scholar
  6. Garnaut, R. and A. Clunies Ross (1983). Taxation of Mineral Rents. Oxford: Clarendon Press.Google Scholar
  7. Gordon, R. L. (1967). “A reinterpretation of the pure theory of exhaustion.” Journal of Political Economy, Vol. 75, No. 3 (June), pp. 274–286.CrossRefGoogle Scholar
  8. Gordon, R. J. (1984). “Supply shocks and monetary policy revisited.,” American Economic Review, Vol. 74, No. 2 (May), pp. 38–43.Google Scholar
  9. Hotelling, H. (1931). “The economics of exhaustible resources.” Journal of Political Economy, Vol. 39.Google Scholar
  10. Hughes, H. (1975). “Economic rents, the distribution of gains from mineral exploitation, and mineral development policy.” World Development, Vol. 3, Nos. 11 and 12.Google Scholar
  11. Hughes, H. and S. Singh (1978). “Economic rent: Incidence in selected metals and minerals.” Resources Policy, Vol. 4, No. 2 (June), pp. 135–145.CrossRefGoogle Scholar
  12. Johnson, C. J. (1981). “Considerations in establishing an effective production sharing type tax regime for petroleum.” Resources Policy, Vol. 7, No. 2 (June).Google Scholar
  13. Lipsey, R. G. and K. Lancaster (1956). “The general theory of second best.” Review of Economic Studies, Vol. 24, No. 63, pp. 11–32.CrossRefGoogle Scholar
  14. Little, I. M. D. and J. A. Mirrlees (1969). Social Cost Benefit Analysis, Vol. II of Manual of Industrial Project Analysis. Paris: Development Centre of the Organisation for Economic Co-operation and Development.Google Scholar
  15. Munasinghe, M. (1980). “An integrated framework for energy pricing in developing countries.” Energy Journal, Vol. 1, No. 3 (July), pp. 1–30.Google Scholar
  16. Newbery, D. M. G. (1981). The Taxation of Oil Consumption. Report commissioned by the Policy Review Unit, British Petroleum. London: 20 July 1981. Manuscript.Google Scholar
  17. Nordhaus, W. D. (1973). “The allocation of energy resources.” Brookings Papers on Economic Activities, No. 3.Google Scholar
  18. Ranada, J. G. (1982). The Economic Impact of Rising Oil Prices: A Survey of Theory and Methodology. Resource Systems Institute Working Paper Series WP-82-15. Honolulu, Hawaii: The East-West Center.Google Scholar
  19. Siddayao, C. M. (1975a). “Natural gas problems of the United States: Causes and alternatives for the future.” Report prepared for a National Science Foundation funded project of the George Washington University’s Energy Policy Research Project.Google Scholar
  20. Siddayao, C. M. (1975b). The Role of Field Price Regulation of Natural Gas in Its Use for Electricity Generation. Ph.D. Dissertation. George Washington University. Ann Arbor, Michigan: University Microfilms.Google Scholar
  21. Siddayao, C. M. (1978). The Offshore Petroleum Resources of South-East Asia: Some Potential Conflicts and Related Economic Factors. Kuala Lumpur: Oxford University Press.Google Scholar
  22. Siddayao, C. M. (1980). The Supply of Petroleum Reserves in South-East Asia: Economic Implications of Evolving Property Rights Arrangements. Kuala Lumpur: Oxford University Press.Google Scholar
  23. Siddayao, C. M. (1981a). Fossil Fuel Pricing Policies in the Asia-Pacific Region: A Preliminary Assessment of Some Allocative Implications. Expanded version of report prepared for the Asian Development Bank 1980 Regional Energy Survey issued in the Resource Systems Working Paper Series as WP-81-3. Honolulu: The East-West Center.Google Scholar
  24. Siddayao, C. M. (1981b). Pricing of Fossil Fuels in Asia: Allocative Implications. Paper presented at the International Atlantic Economic Conference, London, 1981, and issued in the Resource Systems Working Paper Series as WP-81-11. Honolulu: The East-West Center.Google Scholar
  25. Siddayao, C. M. (1983). Oil Prices, Balance of Payments, and Asia’s Growth: Interaction of Public and Private Sector Responses to Energy Demand/Supply Issues. Copyrighted manuscript.Google Scholar
  26. Siddayao, C. M. (1984). “Book review of Taxation of Mineral Rents by Ross Garnaut and Anthony Clunies Ross.” Journal of Energy and Development.Google Scholar
  27. Solow, R. M. (1974). “The economics of resources or the resources of economics.” American Economic Review, Vol. 64, No. 3, pp. 1–21.Google Scholar
  28. Squire, L. and H. G. van der Tak (1975). Economic Analysis of Projects. Baltimore: The Johns Hopkins University Press (for the World Bank).Google Scholar
  29. Sweeney, J. L. (1984). “The response of energy demand to higher prices: What have we learned?” American Economic Review, Vol. 74, No. 2 (May), pp. 31–37.Google Scholar
  30. Warr, P. G. (1980). “Shadow pricing rules for non-traded commodities.” Oxford Economic Papers, Vol. 34, No. 2, pp. 305–325.Google Scholar

Copyright information

© The East-West Center, Honolulu, and the United Nations, New York 1985

Authors and Affiliations

  • Corazon Morales Siddayao

There are no affiliations available

Personalised recommendations