Maintaining Oil Wealth for the Long Run: Maximum Sustainable Yield

Alaska’s state government is sitting pretty right now, with oil revenues at record levels, $60 billion in savings, and maybe another $100 billion worth of petroleum in the ground. Still, a new paper by Scott Goldsmith, professor emeritus of economics at ISER, finds that trouble is looming, with declining oil production and growing state spending.

But the paper also describes a way for the state to maintain its petroleum wealth for the long run: maximum sustainable yield—that is, setting a level of spending from petroleum wealth that could be sustained indefinitely. The paper estimates that today the sustainable level would be about $6.4 billion a year, but it also points out that the level would change over time, with changing conditions. So if the state did decide to manage its petroleum wealth for maximum sustainable yield, it would need to monitor and update the estimate over time.

Read the analysis (PDF, 512.7KB).

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