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Assessing the U.S. oil security premium

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  • Brown, Stephen P.A.
  • Huntington, Hillard G.

Abstract

World oil supply disruptions lead to U.S. economic losses. Increased oil consumption increases the vulnerability of the economy to oil supply disruptions, but it matters where the additional oil is produced. Increased production from stable producers can dampen future oil price shocks, whereas increased production from unstable producers can exacerbate future oil price shocks. Because oil is fungible, U.S. pricing and import policies can differentiate only between domestic and imported oil rather than between stable and unstable sources. The economic losses associated with oil supply disruptions—GDP losses and some transfers abroad—are externalities that can be quantified as oil security premiums. We estimate these premiums by taking into account projected world oil market conditions, probable oil supply disruptions, the market response to oil supply disruptions, and the resulting U.S. economic losses.

Suggested Citation

  • Brown, Stephen P.A. & Huntington, Hillard G., 2013. "Assessing the U.S. oil security premium," Energy Economics, Elsevier, vol. 38(C), pages 118-127.
  • Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:118-127
    DOI: 10.1016/j.eneco.2013.03.010
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    References listed on IDEAS

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    1. repec:eee:enepol:v:115:y:2018:i:c:p:426-433 is not listed on IDEAS
    2. Molyneaux, Lynette & Brown, Colin & Wagner, Liam & Foster, John, 2016. "Measuring resilience in energy systems: Insights from a range of disciplines," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1068-1079.
    3. repec:eee:enepol:v:115:y:2018:i:c:p:456-469 is not listed on IDEAS
    4. Beccue, Phillip C. & Huntington, Hillard G. & Leiby, Paul N. & Vincent, Kenneth R., 2018. "An updated assessment of oil market disruption risks," Energy Policy, Elsevier, vol. 115(C), pages 456-469.
    5. repec:eee:enepol:v:117:y:2018:i:c:p:25-38 is not listed on IDEAS
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    7. Emery, Isaac & Mbonimpa, Eric & Thal, Alfred E., 2017. "Climate-based policies may increase life-cycle social costs of vehicle fleet operation," Energy Policy, Elsevier, vol. 101(C), pages 1-9.
    8. repec:eee:enepol:v:116:y:2018:i:c:p:357-372 is not listed on IDEAS
    9. repec:eee:enepol:v:113:y:2018:i:c:p:171-192 is not listed on IDEAS
    10. Greene, David L. & Liu, Changzheng, 2015. "U.S. oil dependence 2014: Is energy independence in sight?," Energy Policy, Elsevier, vol. 85(C), pages 126-137.
    11. Charles F. Mason & Lucija A. Muehlenbachs & Sheila M. Olmstead, 2015. "The Economics of Shale Gas Development," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 269-289, October.
    12. repec:eee:enepol:v:115:y:2018:i:c:p:584-615 is not listed on IDEAS
    13. 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.

    More about this item

    Keywords

    Oil markets; Energy security; Oil prices and economic activity;

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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