Economic Justification of Petroleum Industry Automation and Other Alternatives by the Revenue Requirements Method

The Revenue Requirements (RR) method of economic analysis is discussed. The F factor for fixed investment charges against both present and future investments when allowance is made for risk is derived. Further, the components of F factor of minimum acceptable earnings, capital recovery, income taxes, and fixed expense expressed as a fraction of investment are found. The paper shows how to apply the RR method, and examples of the application of the method to typical economic justifications of automation involving digital computers are given.