The Trade Consequences of Pricey Oil
AbstractThis paper examines the trade and trade-induced welfare effects of high oil prices. Using a gravity model of trade we find that the distance elasticity of trade significantly increases with the oil price. This suggests that high oil prices make trade less global. We estimate that an increase in the oil price from 100$ to 200$ would have the similar effect as imposing a world-wide import tariff between 4% and 9%, depending on the distance between countries. In turn, such higher tade costs would lower welfare by 1.8% in the average non-oil-exporting country.
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Bibliographic InfoPaper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 115.
Date of creation: 2013
Date of revision:
oil prices; gravity; trade costs;
Other versions of this item:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-10 (All new papers)
- NEP-CWA-2013-08-10 (Central & Western Asia)
- NEP-ENE-2013-08-10 (Energy Economics)
- NEP-INT-2013-08-10 (International Trade)
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