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PETROLEUM REFINING INDUSTRY: AN ASSESSMENT OF ITS PRODUCTION STRUCTURE *
Author(s) -
MOHAMMED OTHMAN E.,
BURNEY NADEEM A.
Publication year - 2006
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2006.00278.x
Subject(s) - diseconomies of scale , elasticity of substitution , economics , economies of scale , production (economics) , substitution (logic) , capital (architecture) , short run , oil refinery , scale (ratio) , microeconomics , engineering , physics , archaeology , quantum mechanics , computer science , programming language , history , waste management
Cost structure of petroleum refining industry in Kuwait has been examined, with specific focus on factor substitution, and economies of scale and utilisation. This has been done by estimating translog cost functions, both long‐run and short‐run, using annual time‐series data covering the period from 1976 to 1998. The results indicate that the implied production structure is non‐homothetic, and the pattern of scale effect is labour and capital saving but material using. The evidence also supports presence of induced exogenous technical change, which is non‐neutral (labour and capital using, and material saving). The elasticity of substitution between capital and labour is negative, implying that the two inputs are complements. The results also indicate absence of economies and diseconomies of scale in the petroleum refining industry.