ABSTRACT
This chapter presents a review of the theory on the effects of taxes upon oil production. It provides a discussion on the singular characteristics of the Venezuelan case, followed by the estimation of the tax effects. The chapter reviews what has happened in the oil sector in Venezuela since the reforms. The chapter estimates the parameters needed to calibrate a model of the oil sector for a panel of 821 fields, and predict with that model the effects of the reforms. It also provides an estimation of the theoretical model of oil exploitation. In countries like Venezuela the government is more concerned with the development of the oil sector and the collection of revenue coming from the sector. Osmel Manzano chose three properties relevant to the Venezuelan situation: namely, the quality of crude, the degree of difficulty in extracting and the degree in difficulty in finding the crude in the area.
