8. Russian Oil in the 2 lstCentury The Russian oil economy is a microcosm of the Russian economy. Just as the petroleum sectors of modem market economies must be analysed using conventional economic tools based on market incentives, and responses to them constrained by the regulatory environment within which they operate, the technology available and the resource base, the Russian industry must be analysed within the context of incentives and constraints. When economists analyse the future prospects for oil in modem market economies they tend to dwell on topics such as reserves, regulations and incentives. This is because the markets within which they operate function eEciently; that is, transactions costs are low, and as a result economic actors respond in predictable ways. While the predictions of economists analysing marketbased systems are not always correct, the reasons for their failings most often lie either in unanticipated events or the rudimentary nature of economics as a developing social science. When forecasts are made regarding the oil economies of developing countries, in contrast, less emphasis is placed on reserves, regulations and incentives, and, rather, it is politics and the functioning of supply chains that come to the forefront of analysts’ minds. This is because knowing that reserves exist does not mean they can be exploited successfully; understanding regulations does not mean that they are applied, and while individuals will respond to incentives, they may not be sufficiently transparent to allow predictions to be made. Often, those hired to make predictions are specialists in...
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