The Optimal Allocation of Iran's Natural Gas

Abstract

T

he optimal allocation of natural gas resources to various uses such as final and intermediate consumption, injection into oil fields, and exports can help policymakers to use this kind of resources efficiently. Empirical evidence support using hyperbolic discount rates instead of fixed discount rates in the economic literature. The purpose of this study is to maximize the social welfare function and analyze the optimal paths of different uses of natural gas over the next three decades based on a nonlinear dynamic programming model using a hyperbolic discount rate. The results show that in the current situation, gas exports do not maximize social welfare, but by expanding Iran's natural gas production, exports will lead to maximizing social welfare.