Optimization of the Economy of an Oil-Producing Country

A dynamic socioeconomic model of a small oil-producing country has been set up, based on a two-sector economy (oil sector and non-oil sector) and including population dynamics, internal consumption, and external investment. With the aid of a computer program, the model can be used to optimize the rates of oil production and investment in oil production. The criterion used for optimization is the present value of future income (including the worth of remaining oil reserves in the ground). Comparative results for a 50-year period are obtained, showing that optimum oil production peaks in the first 10-year period and drops gradually. The optimality of this production pattern is almost unaffected by different planning parameters, while the optimal schedule for investment in the oil sector is sensitive to other planning parameter choices.