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The Costs of U.S. Oil Dependency

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  • Parry, Ian

    ()
    (Resources for the Future)

  • Darmstadter, Joel

    ()
    (Resources for the Future)

Abstract

This paper first describes trends and future predictions of factors that determine U.S. dependence on oil and oil imports. We then review evidence on the oil premium, that is, the extent to which the costs to the United States as a whole from extra oil consumption may exceed the private costs to individual oil users. The premium has two main components: one reflects the risk of macroeconomic disruptions from oil price shocks, while the other stems from U.S. market power in the world oil market. Our best assessment of the oil premium is $5/barrel (equivalent to 12 cents per gallon of gasoline), which would warrant a broad, though moderately scaled, tax on all uses of oil.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-03-59.

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Date of creation: 15 Dec 2003
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Handle: RePEc:rff:dpaper:dp-03-59

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Keywords: energy security; oil imports; oil premium; macroeconomic disruptions;

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References

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  1. Bohi, Douglas R. & Toman, Michael A., 1993. "Energy security: externalities and policies," Energy Policy, Elsevier, vol. 21(11), pages 1093-1109, November.
  2. Griffin, James M, 1985. "OPEC Behavior: A Test of Alternative Hypotheses," American Economic Review, American Economic Association, vol. 75(5), pages 954-63, December.
  3. Gisser, Micha & Goodwin, Thomas H, 1986. "Crude Oil and the Macroeconomy: Tests of Some Popular Notions: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 95-103, February.
  4. Michael R. Darby, 1981. "The Price of Oil and World Inflation and Recession," UCLA Economics Working Papers 228, UCLA Department of Economics.
  5. Ian W. H. Parry & Kenneth A. Small, 2005. "Does Britain or the United States Have the Right Gasoline Tax?," American Economic Review, American Economic Association, vol. 95(4), pages 1276-1289, September.
  6. Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
  7. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
  8. Carol Dahl & Mine Yucel, 1991. "Testing Alternative Hypotheses of Oil Producer Behavior," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 117-138.
  9. Andrew Atkeson & Patrick J. Kehoe, 1997. "Models of energy use: putty-putty vs. putty-clay," Staff Report 230, Federal Reserve Bank of Minneapolis.
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Citations

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Cited by:
  1. Robert Hahn & Caroline Cecot, 2009. "The benefits and costs of ethanol: an evaluation of the government’s analysis," Journal of Regulatory Economics, Springer, vol. 35(3), pages 275-295, June.
  2. Schubert, Stefan Franz, 2009. "Dynamic Effects of Oil Price Shocks and their Impact on the Current Account," MPRA Paper 16738, University Library of Munich, Germany.
  3. repec:reg:wpaper:31 is not listed on IDEAS
  4. Wiser, Ryan & Bolinger, Mark, 2007. "Can deployment of renewable energy put downward pressure on natural gas prices?," Energy Policy, Elsevier, vol. 35(1), pages 295-306, January.
  5. Löschel, Andreas & Moslener, Ulf & Rübbelke, Dirk T.G., 2010. "Indicators of energy security in industrialised countries," Energy Policy, Elsevier, vol. 38(4), pages 1665-1671, April.
  6. Delucchi, Mark A. & Murphy, James J., 2008. "US military expenditures to protect the use of Persian Gulf oil for motor vehicles," Energy Policy, Elsevier, vol. 36(6), pages 2253-2264, June.
  7. Peter Maniloff, 2013. "Ethanol and Energy Security," Working Papers 2013-10, Colorado School of Mines, Division of Economics and Business.
  8. Zhuang, Jun & Marchant, Mary A. & Nokes, Sue & Strobel, Herbert, 2004. "Economic Analysis of Cellulase Production by Clostridium thermocellum in Solid State and Submerged Fermentation," Staff Papers 31982, University of Kentucky, Department of Agricultural Economics.
  9. Hahn, Robert & Passell, Peter, 2010. "The economics of allowing more U.S. oil drilling," Energy Economics, Elsevier, vol. 32(3), pages 638-650, May.
  10. Santos, Georgina & Behrendt, Hannah & Maconi, Laura & Shirvani, Tara & Teytelboym, Alexander, 2010. "Part I: Externalities and economic policies in road transport," Research in Transportation Economics, Elsevier, vol. 28(1), pages 2-45.

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