The Costs of U.S. Oil Dependency

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.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10644
Total Pages:
40
JEL Codes:
Q43; Q41; Q38
Series Statement:
Discussion Paper 03-59




 Record created 2017-04-01, last modified 2017-07-24

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