Abstract
This article analyses the social cost of imported oil from both a conceptual and empirical perspective. A conceptual framework of the oil import premium — the difference between social and private marginal cost of imported oil — is developed. It is argued that there are two components to the premium: the long-run effect of changes in import demand on the world oil price, and the external costs of oil supply disruption as related to changes in oil use. Using this framework as a reference point, an evaluation of quantitative estimates of the premium is presented. The estimates span a wide range, from near zero to well over $100 per barrel, and are shown to be highly sensitive to behavioural assumptions about the world oil market. The article concludes by noting that an oil import fee is likely to be the best policy instrument to capture the first component of the premium, and a strategic petroleum reserve, the best policy instrument to capture the second component.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
