The Effects of Transport Regulation on the Oil Market: Does Market Power Matter?

Snorre Kverndokk and Knut Einar Rosendahl

RFF Working Paper Series from Resources for the Future

Abstract: Popular instruments to regulate consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel efficiency. Their impacts on oil consumption and price vary. One important factor is the market setting. We show that if market power is present in the oil market, the directions of change in consumption and price may contrast those in a competitive market. As a result, the market setting impacts not only the effectiveness of the policy instruments to reduce oil consumption, but also terms of trade and carbon leakage. In particular, we show that under monopoly, reduced oil consumption due to increased fuel efficiency will unambiguously increase the price of oil.

Keywords: transport regulations; oil market; monopoly; terms-of-trade effects; carbon leakage (search for similar items in EconPapers)
JEL-codes: D42 Q54 R48 (search for similar items in EconPapers)
Date: 2010-09-03
New Economics Papers: this item is included in nep-ene, nep-ind and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Effects of Transport Regulation on the Oil Market: Does Market Power Matter? (2013)
Working Paper: The effects of transport regulation on the oil market. Does market power matter? (2010)
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