The Costs of U.S. Oil Dependency

Ian Parry and Joel Darmstadter

RFF Working Paper Series from Resources for the Future

Abstract: 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.

Keywords: energy security; oil imports; oil premium; macroeconomic disruptions (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Date: 2003-12-15
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (19)

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Working Paper: The Costs of U.S. Oil Dependency (2003)
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