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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.

Suggested Citation

  • Parry, Ian & Darmstadter, Joel, 2003. "The Costs of U.S. Oil Dependency," RFF Working Paper Series dp-03-59, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-03-59
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    References listed on IDEAS

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    Cited by:

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    2. 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.
    3. Jammazi, Rania, 2012. "Oil shock transmission to stock market returns: Wavelet-multivariate Markov switching GARCH approach," Energy, Elsevier, vol. 37(1), pages 430-454.
    4. Peter Maniloff, 2013. "Ethanol and Energy Security," Working Papers 2013-10, Colorado School of Mines, Division of Economics and Business.
    5. Ryan Keefe & James P. Griffin & John D. Graham, 2008. "The Benefits and Costs of New Fuels and Engines for Light‐Duty Vehicles in the United States," Risk Analysis, John Wiley & Sons, vol. 28(5), pages 1141-1154, October.
    6. Schubert, Stefan F., 2014. "Dynamic Effects Of Oil Price Shocks And Their Impact On The Current Account," Macroeconomic Dynamics, Cambridge University Press, vol. 18(2), pages 316-337, March.
    7. 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.
    8. Newell, Richard G. & Pizer, William A. & Raimi, Daniel, 2019. "U.S. federal government subsidies for clean energy: Design choices and implications," Energy Economics, Elsevier, vol. 80(C), pages 831-841.
    9. Brown, Stephen P.A. & Huntington, Hillard G., 2015. "Evaluating U.S. oil security and import reliance," Energy Policy, Elsevier, vol. 79(C), pages 9-22.
    10. 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.
    11. 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.
    12. Gerlagh, Reyer & Liski, Matti, 2008. "Strategic Resource Dependence," Economic Theory and Applications Working Papers 44222, Fondazione Eni Enrico Mattei (FEEM).
    13. Hedenus, Fredrik & Azar, Christian & Johansson, Daniel J.A., 2010. "Energy security policies in EU-25--The expected cost of oil supply disruptions," Energy Policy, Elsevier, vol. 38(3), pages 1241-1250, March.
    14. Zhuang, Jun & Marchant, Mary A. & Nokes, Sue & Strobel, Herbert, 2004. "Economic Analysis of Cellulase Production by Clostridium thermocellum in Solid State and Submerged Fermentation," 2004 Annual meeting, August 1-4, Denver, CO 20286, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Brown, Stephen P.A., 2018. "New estimates of the security costs of U.S. oil consumption," Energy Policy, Elsevier, vol. 113(C), pages 171-192.
    16. Leiby, Paul N. & Rubin, Jonathan, 2013. "Energy security implications of a national low carbon fuel standard," Energy Policy, Elsevier, vol. 56(C), pages 29-40.
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    More about this item

    Keywords

    energy security; oil imports; oil premium; macroeconomic disruptions;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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