The Effects of Transport Regulation on the Oil Market: Does Market Power Matter?
AbstractPopular instruments to regulate consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel efficiency. Their impacts on oil consumption and price vary. One important factor is the market setting. We show that if market power is present in the oil market, the directions of change in consumption and price may contrast those in a competitive market. As a result, the market setting impacts not only the effectiveness of the policy instruments to reduce oil consumption, but also terms of trade and carbon leakage. In particular, we show that under monopoly, reduced oil consumption due to increased fuel efficiency will unambiguously increase the price of oil.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-10-40.
Date of creation: 03 Sep 2010
Date of revision:
transport regulations; oil market; monopoly; terms-of-trade effects; carbon leakage;
Other versions of this item:
- Snorre Kverndokk & Knut Einar Rosendahl, 2010. "The effects of transport regulation on the oil market. Does market power matter?," Discussion Papers 629, Research Department of Statistics Norway.
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-18 (All new papers)
- NEP-ENE-2010-09-18 (Energy Economics)
- NEP-IND-2010-09-18 (Industrial Organization)
- NEP-REG-2010-09-18 (Regulation)
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