Quad-O’s Effect on International Crude Oil, Distillate Prices, and Industry Returns

The Environmental Protection Agency’s Quad-O regulation’s objective is to reduce methane emissions; however, its effects on industry output and international crude oil and natural gas prices remain poorly understood. Quad-O increased international prices for crude oil, natural gas, conventional gas, diesel, and aviation fuel, but did not produce uniform effects on firm returns across upstream, midstream, and downstream sectors. While the regulation’s implementation had limited effects on most firm returns, equipment & services and transportation & pipeline sectors experienced adverse returns following the Quad-O announcement. Although consumers faced higher energy prices, these sectoral return differential effects suggest that oil and gas consumers bore a larger share of the regulatory burden.