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The Effect of Changes in World Crude Oil Prices on U.S. Automobile Exports

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Author Info

  • Maksim Belenkiy

    (Economist, International Trade Administration, U.S. Department of Commerce, Washington DC, USA)

  • Stefan Osborne

    (Economist, International Trade Administration, U.S. Department of Commerce, Washington DC, USA)

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    Abstract

    This study describes an export model where consumers differentiate between different types of automobiles by the distance they can travel on one dollar’s worth of fuel. The model predicts that the overall demand for vehicles falls as crude oil prices rise, and that the demand for less fuelefficient vehicles falls relatively more. In particular, we estimate that between 2007 and 2008, when the crude oil prices increased by 32 percent, the export demand for the SUVs manufactured in the United States declined by over $700 million. This implies that the relatively less fuel-efficient U.S.- model vehicles will tend to suffer a competitive disadvantage worldwide when crude oil prices are high. We discuss the potential role of the proposed CAFÉ standards in improving fuel-efficiency and growing exports of the U.S. vehicle fleet.

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    Bibliographic Info

    Article provided by Econjournals in its journal International Journal of Energy Economics and Policy.

    Volume (Year): 2 (2012)
    Issue (Month): 3 ()
    Pages: 147-158

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    Handle: RePEc:eco:journ2:2012-03-7

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    Web page: http://www.econjournals.com

    Related research

    Keywords: Fuel efficiency; CAFÉ standards; International trade; Econometrics;

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    References

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    1. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 417-474.
    2. Li, Shanjun & Linn, Joshua & Muehlegger, Erich, 2012. "Gasoline Taxes and Consumer Behavior," Working Paper Series rwp12-006, Harvard University, John F. Kennedy School of Government.
    3. Eric Verhoogen, 2007. "Trade, quality upgrading and wage inequality in the Mexican manufacturing sector," Discussion Papers 0607-08, Columbia University, Department of Economics.
    4. David Greene, 2010. "Why the New Market for New Passenger Cars Generally Undervalues Fuel Economy," OECD/ITF Joint Transport Research Centre Discussion Papers 2010/6, OECD Publishing.
    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    6. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
    7. Gerard, David & Lave, Lester B., 2003. "The Economics of CAFE Reconsidered: A Response to CAFE Critics and A Case for Fuel Economy Standards," Working paper 139, Regulation2point0.
    8. Baldwin, Richard & Harrigan, James, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," CEPR Discussion Papers 6368, C.E.P.R. Discussion Papers.
    9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    10. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
    11. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
    12. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    13. David L. Greene, 1992. "Vehicle Use and Fuel Economy: How Big is the "Rebound" Effect?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 117-144.
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