Empirical evidence for the superiority of non-US oil and gas investments

This paper provides empirical estimates of the return on US and non-US exploration investment. The estimates are obtained from a polynomial distributed lag model [Econometrica 33 (1965) 178] that relates the present value of current period reserve discoveries to current and lagged US and non-US exploration investment. The empirical evidence presented in the paper indicates that the net present value of $1 invested in non-US exploration is larger in a statistically significant sense than the net present value of $1 invested in U.S exploration. In particular, results indicate that the return on non-US exploration investment is approximately 3.5 times as large as the return earned on US exploration investment. The results reported in this paper provide insights potentially useful to US energy policymakers. (C) 2001 Elsevier Science B.V. All rights reserved.