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The Trade Consequences of Pricey Oil

  • David von Below
  • Pierre-Louis Vezina

This paper examines the trade and trade-induced welfare effects of high oil prices. Using a gravity model of trade we find that the distance elasticity of trade significantly increases with the oil price. This suggests that high oil prices make trade less global. We estimate that an increase in the oil price from 100$ to 200$ would have the similar effect as imposing a world-wide import tariff between 4% and 9%, depending on the distance between countries. In turn, such higher tade costs would lower welfare by 1.8% in the average non-oil-exporting country.

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File URL: http://www.oxcarre.ox.ac.uk/files/OxCarreRP2013115.pdf
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Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 115.

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Date of creation: 2013
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Handle: RePEc:oxf:oxcrwp:115
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  1. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
  2. Daniel Mirza & Habib Zitouna, 2009. "Oil Prices, Geography and Endogenous Regionalism: Too Much Ado About (Almost) Nothing," Working Papers 2009-26, CEPII research center.
  3. Keith Head & Thierry Mayer, 2013. "Gravity Equations: Workhorse, Toolkit, and Cookbook," Sciences Po Economics Discussion Papers 2013-02, Sciences Po Departement of Economics.
  4. Storeygard, Adam, 2013. "Farther on down the road : transport costs, trade and urban growth in Sub-Saharan Africa," Policy Research Working Paper Series 6444, The World Bank.
  5. Joern Kleinert & Julia Spies, 2011. "Endogenous Transport Costs in International Trade," IAW Discussion Papers 74, Institut für Angewandte Wirtschaftsforschung (IAW).
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  7. Harrigan, James, 2010. "Airplanes and comparative advantage," Journal of International Economics, Elsevier, vol. 82(2), pages 181-194, November.
  8. Jean-François Brun & Céline Carrère & Patrick Guillaumont & Jaime de Melo, 2005. "Has Distance Died? Evidence from a Panel Gravity Model," World Bank Economic Review, World Bank Group, vol. 19(1), pages 99-120.
  9. Anca D. Cristea & David Hummels & Laura Puzzello & Misak G. Avetisyan, 2011. "Trade and the Greenhouse Gas Emissions from International Freight Transport," NBER Working Papers 17117, National Bureau of Economic Research, Inc.
  10. Santos Silva, J.M.C & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  11. Jonathan Eaton & Samuel Kortum, 2012. "Putting Ricardo to Work," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 65-90, Spring.
  12. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
  13. Bergin, Paul R. & Glick, Reuven, 2007. "Global price dispersion: Are prices converging or diverging?," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 703-729, September.
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