The Impact of Oil Fiscal Regimes in Developing Countries

This paper investigates the response of fiscal regime on oil prices movement in oil developing countries. The oil price movement may effect on fiscal regime decision of oil exporting countries to adjust crude oil revenue. Changing of fiscal regime in oil exporting countries led to stabilize their macroeconomic volatility such as crude oil revenue and their budget balance tax gap. The speed of adjustment between government response of oil and gas fiscal regime and firm responses. We estimated behavior pattern and decision of oil and gas national and multi-national companies across the world using structural behavior equation across 100 oil and gas firms within field level analysis across developing countries. We employed Wood Mackenzie database to measure the possibilities of fiscal regime through micro and macro transmission structure. Micro transmission measured the impact of oil price movement on cash flow project on field activity across oil and gas firms. We estimate this cash flow by stochastic price movement by distinguished into spot price. This stochastic movement of each field in each country to determined future contract by long term risk premium and short term risk premium affected of world crude oil price in the future. In macro transmission we offer Bayesian Panel Markov Switching to perform the speed of adjustment of micro and macro transmission on oil price movement and vice versa. To best our knowledge this approach has not been conducted by previous studies which reconcile both micro level and macro level of oil industrial behavior. We found that speed of adjustment response of fiscal regime in firm level faster than government response of fiscal regime. We mapped level of anticipated risk of in each country that conclude that oil price shock affected in long term contract